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MKS Instruments, Inc.’s (NASDAQ:MKSI) released its most recent earnings update in December 2018, which showed that the business gained from a strong tailwind, eventuating to a double-digit earnings growth of 16%. Investors may find it useful to understand how market analysts view MKS Instruments’s earnings growth trajectory 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.
Analysts’ expectations for the coming year seems pessimistic, with earnings reducing by a double-digit -20%. However, the next few years show a contrast, with earnings growth becoming positive in 2021, with the bottom line increasing to US$470m in 2022.
Even though it is useful to be aware of the growth rate each year relative to today’s value, it may be more valuable to evaluate the rate at which the company is rising or falling every year, on average. The benefit of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of MKS Instruments’s earnings trajectory over time, which may be more relevant for long term investors. To compute 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 4.7%. This means that, we can expect MKS Instruments will grow its earnings by 4.7% every year for the next couple of years.
For MKS Instruments, there are three essential 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 MKSI 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 MKSI is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of MKSI? 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. On rare occasion, data errors may occur. Thank you for reading.