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In December 2018, Hubbell Incorporated (NYSE:HUBB) released its latest earnings announcement, which revealed that the company gained from a strong tailwind, eventuating to a double-digit earnings growth of 48%. Below is a brief commentary on my key takeaways on how market analysts predict Hubbell’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.
Market analysts’ prospects for the upcoming year seems optimistic, with earnings increasing by a robust 12%. This growth seems to continue into the following year with rates arriving at double digit 23% compared to today’s earnings, and finally hitting US$469m by 2022.
While it’s useful to understand the growth rate each year relative to today’s figure, it may be more valuable to gauge the rate at which the earnings are growing on average every year. The pro of this technique is that we can get a better picture of the direction of Hubbell’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 put 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 9.2%. This means that, we can assume Hubbell will grow its earnings by 9.2% every year for the next couple of years.
For Hubbell, there are three essential 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 HUBB 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 HUBB is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of HUBB? 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 email@example.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.