Ralph Lauren Corporation's (NYSE:RL) released its most recent earnings update in March 2019, which showed that the company experienced a substantial tailwind, more than doubling its earnings from the prior year. Below is my commentary, albeit very simple and high-level, on how market analysts predict Ralph Lauren's earnings growth trajectory 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.
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Market analysts' consensus outlook for next year seems buoyant, with earnings rising by a robust 41%. This growth seems to continue into the following year with rates reaching double digit 51% compared to today’s earnings, and finally hitting US$702m by 2022.
While it is helpful to understand the rate of growth year by year relative to today’s level, it may be more valuable gauging the rate at which the business is growing every year, on average. The pro of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of Ralph Lauren's earnings trajectory over time, which may be more relevant for long term investors. To compute 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 11%. This means that, we can expect Ralph Lauren will grow its earnings by 11% every year for the next few years.
For Ralph Lauren, I've compiled three important factors 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 RL 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 RL is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of RL? 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.