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Genuine Parts Company (NYSE:GPC): Poised For Long-Term Success?

Simply Wall St

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The most recent earnings update Genuine Parts Company's (NYSE:GPC) released in December 2018 showed that the business gained from a strong tailwind, leading to a double-digit earnings growth of 31%. Below is my commentary, albeit very simple and high-level, on how market analysts view Genuine Parts's earnings growth outlook over the next few years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.

View our latest analysis for Genuine Parts

Analysts' outlook for next year seems rather subdued, with earnings rising by a single digit 8.1%. The growth outlook in the following year seems much more positive with rates reaching double digit 14% compared to today’s earnings and declines to US$911m by 2022.

NYSE:GPC Past and Future Earnings, April 3rd 2019

Even though it’s informative knowing the growth each year relative to today’s level, it may be more insightful to gauge the rate at which the business is moving every year, on average. The advantage of this technique is that we can get a bigger picture of the direction of Genuine Parts's earnings trajectory over the long run, irrespective of near term fluctuations, fluctuate up and down. To compute this rate, I put 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 5.2%. This means, we can assume Genuine Parts will grow its earnings by 5.2% every year for the next few years.

Next Steps:

For Genuine Parts, I've put together three fundamental factors 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 GPC 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 GPC is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of GPC? 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.