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What Should You Know About Telephone and Data Systems, Inc.'s (NYSE:TDS) Earnings Trajectory?

Simply Wall St

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In December 2018, Telephone and Data Systems, Inc. (NYSE:TDS) announced its most recent earnings update, which signalled that the business experienced a major headwind with earnings falling by -12%. Investors may find it useful to understand how market analysts perceive Telephone and Data Systems's earnings growth outlook over the next couple of years and whether the future looks brighter. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.

Check out our latest analysis for Telephone and Data Systems

Analysts' outlook for next year seems pessimistic, with earnings declining by -3.7%. But in the following year, there is a complete contrast in performance, with reaching double digit 2.0% compared to today’s level and continues to increase to US$147m in 2022.

NYSE:TDS Past and Future Earnings, April 1st 2019

While it is useful to understand the growth year by year relative to today’s level, it may be more insightful determining the rate at which the company is rising or falling every year, on average. The advantage of this technique is that we can get a bigger picture of the direction of Telephone and Data Systems'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 inserted 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 2.4%. This means that, we can anticipate Telephone and Data Systems will grow its earnings by 2.4% every year for the next couple of years.

Next Steps:

For Telephone and Data Systems, there are three fundamental 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 TDS 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 TDS is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of TDS? 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.