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Medtronic plc (NYSE:MDT): What Does The Future Look Like?

Simply Wall St

The latest earnings release Medtronic plc's (NYSE:MDT) announced in June 2019 signalled that the company experienced a robust tailwind, eventuating to a double-digit earnings growth of 49%. Below is a brief commentary on my key takeaways on how market analysts perceive Medtronic's earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. 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 Medtronic

Analysts' expectations for the coming year seems optimistic, with earnings growing by a robust 21%. This growth seems to continue into the following year with rates arriving at double digit 37% compared to today’s earnings, and finally hitting US$7.1b by 2022.

NYSE:MDT Past and Future Earnings, August 10th 2019

While it is informative knowing the rate of growth year by year relative to today’s level, it may be more insightful to gauge the rate at which the company is growing every year, on average. The advantage of this approach is that it ignores near term flucuations and accounts for the overarching direction of Medtronic's earnings trajectory over time, 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 14%. This means, we can presume Medtronic will grow its earnings by 14% every year for the next couple of years.

Next Steps:

For Medtronic, I've compiled three important aspects you should further research:

  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 MDT 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 MDT is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of MDT? 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.