In December 2018, Ensco Rowan plc (NYSE:ESV) released its most recent earnings announcement, which suggested that losses became smaller relative to the prior year's level as a result of recent tailwinds Below is my commentary, albeit very simple and high-level, on how market analysts predict Ensco Rowan's earnings growth trajectory over the next couple of years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts' expectations for next year seems pessimistic, with earnings becoming even more negative, generating -US$768.1m in 2020. Additionally, earnings are predicted to fall off in the following year, decreasing to -US$616.3m in 2021 and -US$506.1m in 2022.
Although it is useful to be aware of the rate of growth year by year relative to today’s figure, it may be more insightful estimating the rate at which the company is moving on average every year. The advantage of this technique is that we can get a better picture of the direction of Ensco Rowan'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 the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 10%. This means, we can anticipate Ensco Rowan will grow its earnings by 10% every year for the next couple of years.
For Ensco Rowan, there are three essential factors you should further research:
- 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 ESV 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 ESV is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ESV? 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 firstname.lastname@example.org. 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.