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What Should Investors Know About Donaldson Company, Inc.'s (NYSE:DCI) Future?

Simply Wall St

In April 2019, Donaldson Company, Inc. (NYSE:DCI) released its earnings update. Generally, analyst forecasts appear to be pessimistic, with earnings expected to decline by 2.3% in the upcoming year. Though this pessimism is not unsubstantiated given the negative past 5-year average earnings growth. With trailing-twelve-month net income at current levels of US$180m, the consensus growth rate suggests that earnings will decline to US$176m by 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Donaldson Company in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

See our latest analysis for Donaldson Company

Exciting times ahead?

The 6 analysts covering DCI view its longer term outlook with a positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To get an idea of the overall earnings growth trend for DCI, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

NYSE:DCI Past and Future Earnings, September 4th 2019
NYSE:DCI Past and Future Earnings, September 4th 2019

This results in an annual growth rate of 5.2% based on the most recent earnings level of US$180m to the final forecast of US$197m by 2022. This leads to an EPS of $2.72 in the final year of projections relative to the current EPS of $1.38. Margins are currently sitting at 6.6%, approximately the same as previous years. With analysts forecasting revenue growth of 0.09261 and DCI's net income growth expected to roughly track that, this company may add value for shareholders over time.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Donaldson Company, I've put together three essential factors you should further examine:

  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 Donaldson Company 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 Donaldson Company is currently mispriced by the market.

  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Donaldson Company? 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.