U.S. Markets closed

What Should You Know About Metcash Limited's (ASX:MTS) Earnings Outlook?

Simply Wall St

In June 2019, Metcash Limited (ASX:MTS) released its latest earnings announcement, which showed that the company turned profitable again after incurring negative earnings in the previous financial year. Below, I've laid out key growth figures on how market analysts view Metcash's earnings growth trajectory over the next few 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.

See our latest analysis for Metcash

Market analysts' consensus outlook for the upcoming year seems rather muted, with earnings expanding by a single digit 2.5%. The following year doesn't look much more exciting, though earnings does reach AU$210m in 2022.

ASX:MTS Past and Future Earnings, August 6th 2019

While it is useful to be aware of the growth each year relative to today’s value, it may be more insightful to gauge the rate at which the earnings are rising or falling on average every year. The benefit of this approach is that we can get a bigger picture of the direction of Metcash's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate 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 3.7%. This means, we can expect Metcash will grow its earnings by 3.7% every year for the next few years.

Next Steps:

For Metcash, I've compiled three important factors 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 MTS 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 MTS is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of MTS? 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.