On 31 December 2018, Telephone and Data Systems, Inc. (NYSE:TDS) announced its latest earnings update. Overall, analyst consensus outlook appear pessimistic, with profits predicted to drop by -3.7% next year relative to the past 5-year average growth rate of 25%. With trailing-twelve-month net income at current levels of US$135m, the consensus growth rate suggests that earnings will decline to US$130m by 2020. Below is a brief commentary around Telephone and Data Systems’s earnings outlook going forward, which may give you a sense of market sentiment for the company. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
Can we expect Telephone and Data Systems to keep growing?
Over the next three years, it seems the consensus view of the 3 analysts covering TDS is skewed towards the positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
From the current net income level of US$135m and the final forecast of US$147m by 2022, the annual rate of growth for TDS’s earnings is 2.4%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of $0.97 in the final year of forecast compared to the current $1.21 EPS today. With a current profit margin of 2.6%, this movement will result in a margin of 2.7% by 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Telephone and Data Systems, there are three fundamental 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 Telephone and Data Systems 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 Telephone and Data Systems is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Telephone and Data Systems? 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.