The most recent earnings announcement Hexcel Corporation’s (NYSE:HXL) released in December 2018 revealed that the business experienced a minor headwind with earnings falling from US$284m to US$277m, a change of -2.6%. Today I want to provide a brief commentary on how market analysts predict Hexcel’s earnings growth outlook over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Analysts’ expectations for the upcoming year seems rather muted, with earnings increasing by a single digit 8.7%. The growth outlook in the following year seems much more buoyant with rates generating double digit 20% compared to today’s earnings, and finally hitting US$341m by 2022.
Even though it is informative knowing the growth rate each year relative to today’s figure, it may be more valuable to determine the rate at which the company is growing every year, on average. The pro of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of Hexcel’s earnings trajectory over time, which may be more relevant for long term investors. To compute 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 7.5%. This means, we can anticipate Hexcel will grow its earnings by 7.5% every year for the next few years.
For Hexcel, there are three essential factors you should further research:
- 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 HXL 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 HXL is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of HXL? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.