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OMNOVA Solutions Inc. (NYSE:OMN): Is It A Good Long Term Opportunity?

Simply Wall St

The most recent earnings release OMNOVA Solutions Inc.’s (NYSE:OMN) announced in November 2018 indicated that the company finally turned profitable after delivering losses on average over the past couple of years. Today I want to provide a brief commentary on how market analysts perceive OMNOVA Solutions’s earnings growth trajectory 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.

See our latest analysis for OMNOVA Solutions

Analysts’ outlook for the coming year seems optimistic, with earnings rising by a robust 34%. This growth seems to continue into the following year with rates arriving at double digit 81% compared to today’s earnings, and finally hitting US$41m by 2022.

NYSE:OMN Past and Future Earnings, March 12th 2019

While it is useful to be aware of the growth year by year relative to today’s value, it may be more insightful analyzing the rate at which the earnings are growing every year, on average. The advantage of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of OMNOVA Solutions’s earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I’ve inserted 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 24%. This means, we can assume OMNOVA Solutions will grow its earnings by 24% every year for the next few years.

Next Steps:

For OMNOVA Solutions, I’ve compiled three relevant aspects you should look at:

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