In June 2017, Genesis Energy Limited (NZSE:GNE) released its latest earnings announcement, which indicated that the company faced a significant headwind with earnings declining by -35.56%. Below, I’ve presented key growth figures on how market analysts perceive Genesis Energy’s earnings growth outlook over the next few years and whether the future looks brighter. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings. See our latest analysis for Genesis Energy
Market analysts’ prospects for this coming year seems pessimistic, with earnings declining by a double-digit -32.72%. In the next couple of years, earnings are predicted to continue to be below today’s level, with a decline of -23.28% in 2019, eventually reaching NZ$91.1M in 2020.
Although it’s useful to understand the growth year by year relative to today’s value, it may be more insightful to gauge the rate at which the business is growing on average every year. The advantage of this method is that it ignores near term flucuations and accounts for the overarching direction of Genesis Energy’s earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I’ve inserted 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 8.90%. This means that, we can assume Genesis Energy will grow its earnings by 8.90% every year for the next few years.
For Genesis Energy, there are three key 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 GNE 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 GNE is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of GNE? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.