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In December 2018, Aon plc (NYSE:AON) announced its earnings update. Overall, it seems that analyst forecasts are substantially optimistic, as a 64% rise in profits is expected in the upcoming year, relative to the past 5-year average growth rate of -10%. With trailing-twelve-month net income at current levels of US$1.1b, we should see this rise to US$1.7b in 2020. Below is a brief commentary on the longer term outlook the market has for Aon. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
Can we expect Aon to keep growing?
The view from 17 analysts over the next three years is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of AON's earnings growth over these next few years.
By 2022, AON's earnings should reach US$2.5b, from current levels of US$1.1b, resulting in an annual growth rate of 27%. EPS reaches $10.87 in the final year of forecast compared to the current $4.32 EPS today. With a current profit margin of 9.8%, this movement will result in a margin of 20% by 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For Aon, there are three relevant 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 Aon 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 Aon is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Aon? 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.