The latest earnings release Fletcher Building Limited's (NZSE:FBU) announced in August 2019 indicated that the business turned profitable again after experiencing losses in the previous financial year. Investors may find it useful to understand how market analysts predict Fletcher Building's earnings growth trajectory over the next few years and whether the future looks brighter. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Market analysts' consensus outlook for the coming year seems optimistic, with earnings expanding by a robust 14%. This growth seems to continue into the following year with rates arriving at double digit 29% compared to today’s earnings, and finally hitting NZ$330m by 2022.
Even though it is useful to be aware of the growth year by year relative to today’s figure, it may be more valuable to gauge the rate at which the business is rising or falling every year, on average. The pro of this technique is that it ignores near term flucuations and accounts for the overarching direction of Fletcher Building's earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I've appended a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 8.2%. This means that, we can expect Fletcher Building will grow its earnings by 8.2% every year for the next couple of years.
For Fletcher Building, I've put together three relevant aspects you should further examine:
- 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.
- Valuation: What is FBU 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 FBU is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of FBU? 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 firstname.lastname@example.org. 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.