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In December 2018, Gates Industrial Corporation plc (NYSE:GTES) released its latest earnings announcement, which revealed that the company benefited from a sizeable tailwind, eventuating to a high double-digit earnings growth of 63%. Below, I've laid out key numbers on how market analysts predict Gates Industrial's earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. 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 this coming year seems pessimistic, with earnings decreasing by -6.9%. But in the following year, there is a complete contrast in performance, with arriving at double digit 33% compared to today’s level and continues to increase to US$375m in 2022.
Even though it is informative understanding the rate of growth each year relative to today’s value, it may be more beneficial to analyze the rate at which the earnings are moving every year, on average. The benefit of this method is that we can get a better picture of the direction of Gates Industrial's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I've inserted 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 15%. This means, we can presume Gates Industrial will grow its earnings by 15% every year for the next couple of years.
For Gates Industrial, I've compiled three pertinent 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 GTES 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 GTES is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of GTES? 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.