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On 31 March 2019, Allison Transmission Holdings, Inc. (NYSE:ALSN) released its most recent earnings update. Generally, analyst consensus outlook appear bearish, with profits predicted to drop by -14% next year compared with the past 5-year average growth rate of 31%. Currently with a trailing-twelve-month profit of US$639m, the consensus growth rate suggests that earnings will drop to US$551m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those interested in more of an analysis of the company, you can research its fundamentals here.
Can we expect Allison Transmission Holdings to keep growing?
Longer term expectations from the 14 analysts covering ALSN’s stock is one of negative sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To understand the overall trajectory of ALSN'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.
From the current net income level of US$639m and the final forecast of US$470m by 2022, the annual rate of growth for ALSN’s earnings is -8.8%. EPS reaches $4.67 in the final year of forecast compared to the current $4.8 EPS today. The primary reason for earnings contraction is due to a reduction in the top line of -3.6%, squeezing the bottom line. With earnings declining at a faster rate over time, margins is expected to contract from 24% to 19% by the end of 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For Allison Transmission Holdings, I've compiled three relevant aspects you should look at:
- 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 Allison Transmission Holdings 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 Allison Transmission Holdings is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Allison Transmission Holdings? 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 email@example.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.