The latest earnings update National Instruments Corporation (NASDAQ:NATI) released in December 2018 confirmed that the company experienced a significant tailwind, more than doubling its earnings from the prior year. Below is a brief commentary on my key takeaways on how market analysts predict National Instruments’s earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Market analysts’ consensus outlook for next year seems rather muted, with earnings expanding by a single digit 5.2%. The growth outlook in the following year seems much more buoyant with rates arriving at double digit 25% compared to today’s earnings, and finally hitting US$221m by 2022.
While it is informative understanding the rate of growth year by year relative to today’s value, it may be more insightful gauging the rate at which the company is rising or falling on average every year. The benefit of this approach is that we can get a bigger picture of the direction of National Instruments’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 put 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 12%. This means that, we can assume National Instruments will grow its earnings by 12% every year for the next couple of years.
For National Instruments, I’ve put together three essential aspects you should look at:
- 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 NATI 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 NATI is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of NATI? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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