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What Should Investors Know About BHP Group's (ASX:BHP) Earnings Trend?

Simply Wall St

In August 2019, BHP Group (ASX:BHP) announced its most recent earnings update, which indicated that the business benefited from a strong tailwind, leading to a double-digit earnings growth of 30%. Below, I've presented key growth figures on how market analysts view BHP Group'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.

View our latest analysis for BHP Group

Analysts' outlook for the upcoming year seems buoyant, with earnings growing by a robust 31%. However, earnings is expected to fall slightly in the following year before rising again to US$10b in 2022.

ASX:BHP Past and Future Earnings, September 14th 2019

Even though it’s helpful to be aware of the growth rate each year relative to today’s value, it may be more beneficial to gauge the rate at which the company is moving on average every year. The pro of this approach is that we can get a bigger picture of the direction of BHP Group's earnings trajectory over the long run, irrespective of near term fluctuations, be more volatile. To calculate 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 2.2%. This means that, we can assume BHP Group will grow its earnings by 2.2% every year for the next few years.

Next Steps:

For BHP Group, I've put together three fundamental aspects you should look at:

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