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What Should You Know About Callaway Golf Company's (NYSE:ELY) Long Term Outlook?

Simply Wall St

Callaway Golf Company's (NYSE:ELY) most recent earnings update in December 2018 revealed that the business experienced a significant tailwind, more than doubling its earnings from the prior year. Investors may find it useful to understand how market analysts view Callaway Golf's earnings growth outlook 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.

See our latest analysis for Callaway Golf

Analysts' outlook for next year seems pessimistic, with earnings reducing by a double-digit -10%. However, the next few years show a contrast, with earnings growth becoming positive in 2021, with the bottom line increasing to US$124m in 2022.

NYSE:ELY Past and Future Earnings, April 17th 2019

Although it is informative knowing the rate of growth each year relative to today’s level, it may be more beneficial gauging the rate at which the earnings are growing every year, on average. The advantage of this approach is that we can get a bigger picture of the direction of Callaway Golf'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 inserted 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 4.3%. This means that, we can assume Callaway Golf will grow its earnings by 4.3% every year for the next couple of years.

Next Steps:

For Callaway Golf, I've compiled three fundamental aspects 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 ELY 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 ELY is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ELY? 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.