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ITV plc (LON:ITV): Earnings Growth Remains Elusive

Simply Wall St

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Since ITV plc (LON:ITV) released its earnings in December 2018, the consensus outlook from analysts appear pessimistic, with profits predicted to drop by 15% next year relative to the past 5-year average growth rate of 0.8%. With trailing-twelve-month net income at current levels of UK£466m, the consensus growth rate suggests that earnings will decline to UK£398m by 2020. Below is a brief commentary around ITV'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.

View our latest analysis for ITV

What can we expect from ITV in the longer term?

Longer term expectations from the 16 analysts covering ITV’s stock is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To understand the overall trajectory of ITV's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

LSE:ITV Past and Future Earnings, July 13th 2019

From the current net income level of UK£466m and the final forecast of UK£476m by 2022, the annual rate of growth for ITV’s earnings is 1.3%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of £0.11 in the final year of forecast compared to the current £0.12 EPS today. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 15% to 14% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For ITV, there are three pertinent factors you should further examine:

  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 ITV 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 ITV is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of ITV? 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 editorial-team@simplywallst.com. 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.