The latest earnings release Lundin Mining Corporation’s (TSE:LUN) announced in December 2018 revealed that the company endured a major headwind with earnings deteriorating by -47%. Below is my commentary, albeit very simple and high-level, on how market analysts view Lundin Mining’s earnings growth trajectory 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.
Market analysts’ consensus outlook for the coming year seems rather subdued, with earnings rising by a single digit 9.3%. In the following year, earnings growth is expected to rise at an exponential rate, with earnings reaching US$477m by 2022.
While it’s useful to understand the growth rate each year relative to today’s figure, it may be more insightful to gauge the rate at which the business is moving on average every year. The benefit of this approach is that we can get a bigger picture of the direction of Lundin Mining’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 analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 26%. This means that, we can presume Lundin Mining will grow its earnings by 26% every year for the next couple of years.
For Lundin Mining, there are three essential factors 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 LUN 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 LUN is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of LUN? 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.