In December 2018, Hikma Pharmaceuticals PLC (LON:HIK) announced its latest earnings update, which showed that the company turned profitable again after experiencing negative earnings in the previous financial year. Below, I’ve laid out key growth figures on how market analysts view Hikma Pharmaceuticals’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’ prospects for the coming year seems rather subdued, with earnings climbing by a single digit 2.4%. The growth outlook in the following year seems much more positive with rates generating double digit 10% compared to today’s earnings, and finally hitting US$358m by 2022.
Even though it’s helpful to be aware of the growth year by year relative to today’s figure, it may be more beneficial to evaluate the rate at which the business is moving on average every year. The benefit of this method is that we can get a better picture of the direction of Hikma Pharmaceuticals’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute 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 6.7%. This means, we can expect Hikma Pharmaceuticals will grow its earnings by 6.7% every year for the next couple of years.
For Hikma Pharmaceuticals, there are three essential factors 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 HIK 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 HIK is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of HIK? 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.