Since Gates Industrial Corporation plc (NYSE:GTES) released its earnings in December 2018, it seems that analyst expectations are fairly bearish, with profits predicted to rise by 1.0% next year compared with the higher past 5-year average growth rate of 29%. Presently, with latest-twelve-month earnings at US$246m, we should see this growing to US$248m by 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Gates Industrial in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
Can we expect Gates Industrial to keep growing?
Longer term expectations from the 7 analysts covering GTES’s stock is one of positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To get an idea of the overall earnings growth trend for GTES, 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.
From the current net income level of US$246m and the final forecast of US$375m by 2022, the annual rate of growth for GTES’s earnings is 15%. This leads to an EPS of $1.07 in the final year of projections relative to the current EPS of $0.86. With a current profit margin of 7.3%, this movement will result in a margin of 10% by 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For Gates Industrial, I've compiled three important aspects 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 Gates Industrial 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 Gates Industrial is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Gates Industrial? 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.