In March 2019, GlaxoSmithKline plc (LON:GSK) announced its earnings update. Overall, the consensus outlook from analysts appear fairly confident, with profits predicted to increase by 12% next year compared with the past 5-year average growth rate of -27%. By 2020, we can expect GlaxoSmithKline’s bottom line to reach UK£4.0b, a jump from the current trailing-twelve-month of UK£3.6b. I will provide a brief commentary around the figures and analyst expectations in the near term. For those interested in more of an analysis of the company, you can research its fundamentals here.
Exciting times ahead?
The longer term expectations from the 19 analysts of GSK is tilted towards the 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 GSK, 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.
By 2022, GSK's earnings should reach UK£5.2b, from current levels of UK£3.6b, resulting in an annual growth rate of 12%. This leads to an EPS of £1.13 in the final year of projections relative to the current EPS of £0.74. With a current profit margin of 12%, this movement will result in a margin of 15% by 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For GlaxoSmithKline, I've compiled three key aspects you should look at:
- 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 GlaxoSmithKline 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 GlaxoSmithKline is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of GlaxoSmithKline? 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.