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The most recent earnings announcement BBA Aviation plc's (LON:BBA) released in December 2018 signalled that the business faced a slight headwind with earnings deteriorating from US$119m to US$118m, a change of -0.2%. Investors may find it useful to understand how market analysts view BBA Aviation's earnings growth trajectory 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.
Market analysts' prospects for this coming year seems buoyant, with earnings rising by a robust 35%. This growth seems to continue into the following year with rates reaching double digit 46% compared to today’s earnings, and finally hitting US$190m by 2022.
Although it’s useful to understand the growth rate year by year relative to today’s figure, it may be more beneficial evaluating the rate at which the earnings are growing on average every year. The pro of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of BBA Aviation's earnings trajectory over time, 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 13%. This means, we can presume BBA Aviation will grow its earnings by 13% every year for the next couple of years.
For BBA Aviation, there are three relevant 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 BBA 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 BBA is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of BBA? 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.