The most recent earnings update Vesuvius plc’s (LON:VSVS) released in December 2018 signalled that the business experienced a substantial tailwind, more than doubling its earnings from the prior year. Below is my commentary, albeit very simple and high-level, on how market analysts view Vesuvius’s earnings growth outlook over the next few years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Market analysts’ consensus outlook for this coming year seems pessimistic, with earnings declining by a double-digit -11%. Over the medium term, earnings will begin to improve, expanding year on year, and generating UK£144m by 2022.
Even though it’s helpful to be aware of the growth year by year relative to today’s level, it may be more beneficial to analyze the rate at which the company is moving every year, on average. The benefit of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of Vesuvius’s earnings trajectory over time, which may be more relevant for long term investors. To compute 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 3.5%. This means that, we can expect Vesuvius will grow its earnings by 3.5% every year for the next couple of years.
For Vesuvius, 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 VSVS 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 VSVS is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of VSVS? 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 email@example.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.