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What Should Investors Know About Treasury Wine Estates Limited’s (ASX:TWE) Growth?

Lawrence Carr

The most recent earnings release Treasury Wine Estates Limited’s (ASX:TWE) announced in June 2018 indicated that the company experienced a strong tailwind, eventuating to a double-digit earnings growth of 34%. Below, I’ve laid out key numbers on how market analysts predict Treasury Wine Estates’s earnings growth trajectory over the next few years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.

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Market analysts’ consensus outlook for the upcoming year seems positive, with earnings climbing by a robust 25%. This growth seems to continue into the following year with rates arriving at double digit 52% compared to today’s earnings, and finally hitting AU$648m by 2022.

ASX:TWE Future Profit January 22nd 19

While it’s useful to be aware of the growth rate year by year relative to today’s value, it may be more valuable estimating the rate at which the company is growing every year, on average. The advantage of this method is that we can get a bigger picture of the direction of Treasury Wine Estates’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I’ve appended a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 15%. This means, we can presume Treasury Wine Estates will grow its earnings by 15% every year for the next couple of years.

Next Steps:

For Treasury Wine Estates, I’ve compiled three relevant factors you should further research:

  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 TWE 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 TWE is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of TWE? 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.