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The latest earnings update NetApp, Inc. (NASDAQ:NTAP) released in June 2019 suggested that the business benefited from a significant tailwind, more than doubling its earnings from the prior year. Investors may find it useful to understand how market analysts perceive NetApp's earnings growth outlook 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.
Market analysts' prospects for the upcoming year seems pessimistic, with earnings reducing by -7.8%. But in the following year, there's contrast in performance, with earnings growth rates generating double digit 2.2% compared to today’s level before declining. to US$1.1b in 2022.
Although it’s useful to be aware of the growth rate year by year relative to today’s value, it may be more valuable to evaluate the rate at which the business is growing on average every year. The advantage of this method is that we can get a better picture of the direction of NetApp's earnings trajectory over the long run, irrespective of near term fluctuations, be more volatile. 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 0.4%. This means, we can expect NetApp will grow its earnings by 0.4% every year for the next couple of years.
For NetApp, I've compiled three fundamental 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 NTAP 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 NTAP is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of NTAP? 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 firstname.lastname@example.org. 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.