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James Hardie Industries plc (ASX:JHX): Is It A Smart Long Term Opportunity?

Looking at James Hardie Industries plc’s (ASX:JHX) earnings update in June 2018, analyst consensus outlook appear vastly optimistic, with earnings expected to grow by a high double-digit of 80% in the upcoming year, against the past 5-year average growth rate of 12%. By 2019, we can expect James Hardie Industries’s bottom line to reach US$324m, a jump from the current trailing-twelve-month US$179m. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for James Hardie Industries in the longer term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

View our latest analysis for James Hardie Industries

How will James Hardie Industries perform in the near future?

The 10 analysts covering JHX view its longer term outlook with a 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 understand the overall trajectory of JHX’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.

ASX:JHX Future Profit November 8th 18

This results in an annual growth rate of 18% based on the most recent earnings level of US$146m to the final forecast of US$351m by 2021. This leads to an EPS of $0.98 in the final year of projections relative to the current EPS of $0.33. The primary reason for earnings growth is due to reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. In 2021, JHX’s profit margin will have expanded from 7.1% to 12%.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For James Hardie Industries, I’ve put together 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 James Hardie Industries 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 James Hardie Industries is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of James Hardie Industries? 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.