The most recent earnings release Mineral Resources Limited's (ASX:MIN) announced in August 2019 showed that the business faced a significant headwind with earnings declining by -40%. Below is a brief commentary on my key takeaways on how market analysts predict Mineral Resources's earnings growth trajectory over the next couple of years and whether the future looks brighter. 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 the coming year seems positive, with earnings growing by a significant 78%. Earnings are predicted to shoot up to around AU$307m in the following year before plateauing, heading into 2022.
Even though it’s informative knowing the growth each year relative to today’s value, it may be more insightful estimating the rate at which the earnings are moving on average every year. The pro of this method is that we can get a bigger picture of the direction of Mineral Resources's earnings trajectory over the long run, irrespective of near term fluctuations, be more volatile. To calculate this rate, I put 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 18%. This means that, we can anticipate Mineral Resources will grow its earnings by 18% every year for the next few years.
For Mineral Resources, there are three important aspects you should further research:
- 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 MIN 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 MIN is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of MIN? 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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