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Will Hostess Brands, Inc.'s (NASDAQ:TWNK) Earnings Grow In The Years Ahead?

Simply Wall St

In December 2018, Hostess Brands, Inc. (NASDAQ:TWNK) announced its most recent earnings update, which revealed that the company endured a major headwind with earnings falling by -72%. Below is a brief commentary on my key takeaways on how market analysts view Hostess Brands's earnings growth trajectory over the next couple of 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.

View our latest analysis for Hostess Brands

Analysts' expectations for the upcoming year seems pessimistic, with earnings falling by -4.1%. But in the following year, there is a complete contrast in performance, with reaching double digit 22% compared to today’s level and continues to increase to US$90m in 2022.

NasdaqCM:TWNK Past and Future Earnings, April 16th 2019

While it’s helpful to understand the growth each year relative to today’s figure, it may be more beneficial to determine the rate at which the company is moving on average every year. The benefit of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of Hostess Brands'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 analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 11%. This means that, we can presume Hostess Brands will grow its earnings by 11% every year for the next few years.

Next Steps:

For Hostess Brands, there are three important factors you should further research:

  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 TWNK 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 TWNK is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of TWNK? 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.