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Fletcher Building Limited (NZSE:FBU): Poised For Long Term Success?

Simply Wall St

On 30 June 2019, Fletcher Building Limited (NZSE:FBU) released its earnings update. Generally, it seems that analyst forecasts are fairly optimistic, with profits predicted to increase by 16% next year compared with the past 5-year average growth rate of -27%. By 2020, we can expect Fletcher Building’s bottom line to reach NZ$285m, a jump from the current trailing-twelve-month of NZ$246m. Below is a brief commentary around Fletcher Building's earnings outlook going forward, which may give you a sense of market sentiment for the company. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

View our latest analysis for Fletcher Building

How is Fletcher Building going to perform in the near future?

Over the next three years, it seems the consensus view of the 9 analysts covering FBU is skewed towards the positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of FBU's earnings growth over these next few years.

NZSE:FBU Past and Future Earnings, August 21st 2019

This results in an annual growth rate of 9.7% based on the most recent earnings level of NZ$246m to the final forecast of NZ$353m by 2022. EPS reaches NZ$0.43 in the final year of forecast compared to the current NZ$0.29 EPS today. In 2022, FBU's profit margin will have expanded from 3.0% to 4.4%.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Fletcher Building, there are three relevant aspects you should further examine:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Fletcher Building worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Fletcher Building is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Fletcher Building? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.