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What Should You Know About Kingfisher plc's (LON:KGF) Earnings Outlook?

Simply Wall St

The latest earnings announcement Kingfisher plc (LON:KGF) released in May 2019 signalled that the company faced a substantial headwind with earnings declining by -55%. Below is my commentary, albeit very simple and high-level, on how market analysts view Kingfisher'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.

View our latest analysis for Kingfisher

Market analysts' prospects for this coming year seems buoyant, with earnings rising by a significant 94%. This strong growth in earnings is expected to continue, bringing the bottom line up to UK£532m by 2022.

LSE:KGF Past and Future Earnings, August 9th 2019

Even though it’s useful to understand the growth each year relative to today’s figure, it may be more insightful determining the rate at which the company is rising or falling every year, on average. The pro of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of Kingfisher's earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I've appended 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 27%. This means, we can expect Kingfisher will grow its earnings by 27% every year for the next few years.

Next Steps:

For Kingfisher, I've compiled three relevant factors you should further examine:

  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 KGF 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 KGF is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of KGF? 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.