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

Simply Wall St

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In March 2019, James Hardie Industries plc (ASX:JHX) announced its earnings update. Overall, it seems that analyst forecasts are fairly optimistic, with profits predicted to increase by 47% next year against the past 5-year average growth rate of 8.0%. By 2020, we can expect James Hardie Industries’s bottom line to reach US$337m, a jump from the current trailing-twelve-month of US$229m. Below is a brief commentary on the longer term outlook the market has for James Hardie Industries. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

Check out our latest analysis for James Hardie Industries

How is James Hardie Industries going to perform in the near future?

The longer term expectations from the 8 analysts of JHX is tilted towards the positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. 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.

ASX:JHX Past and Future Earnings, July 20th 2019

This results in an annual growth rate of 18% based on the most recent earnings level of US$229m to the final forecast of US$412m by 2022. This leads to an EPS of $0.93 in the final year of projections relative to the current EPS of $0.52. Margins are currently sitting at 9.1%, which is expected to expand to 13% by 2022.

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 pertinent factors you should look at:

  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!

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.