Mohawk Industries, Inc. (NYSE:MHK): Will The Growth Last?
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Mohawk Industries, Inc.’s (NYSE:MHK) latest earnings announcement in December 2018 showed that the business experienced a immense headwind with earnings declining by -11%. Below is my commentary, albeit very simple and high-level, on how market analysts predict Mohawk Industries’s earnings growth outlook over the next few 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.
Check out our latest analysis for Mohawk Industries
Analysts’ outlook for the upcoming year seems pessimistic, with earnings declining by -5.4%. But in the following year, there is a complete contrast in performance, with reaching double digit 5.4% compared to today’s level and continues to increase to US$1.1b in 2022.
Although it’s useful to understand the rate of growth each year relative to today’s value, it may be more insightful to gauge the rate at which the earnings are rising or falling every year, on average. The advantage of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of Mohawk Industries’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 6.3%. This means, we can assume Mohawk Industries will grow its earnings by 6.3% every year for the next couple of years.
Next Steps:
For Mohawk Industries, I’ve compiled three key 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 MHK 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 MHK is currently mispriced by the market.
Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of MHK? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
