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What Should You Know About The Future Of Prudential plc's (LON:PRU)?

Simply Wall St

Based on Prudential plc's (LON:PRU) earnings update in December 2018, analysts seem fairly confident, as a 38% increase in profits is expected in the upcoming year, relative to the past 5-year average growth rate of 6.2%. By 2020, we can expect Prudential’s bottom line to reach UK£4.2b, a jump from the current trailing-twelve-month of UK£3.0b. Below is a brief commentary around Prudential's earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

Check out our latest analysis for Prudential

How is Prudential going to perform in the near future?

The longer term expectations from the 11 analysts of PRU 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. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of PRU's earnings growth over these next few years.

LSE:PRU Past and Future Earnings, April 29th 2019

By 2022, PRU's earnings should reach UK£4.7b, from current levels of UK£3.0b, resulting in an annual growth rate of 12%. This leads to an EPS of £1.79 in the final year of projections relative to the current EPS of £1.17. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 12% to 8.9% by the end of 2022.

Next Steps:

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