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OZ Minerals Limited's (ASX:OZL) announced its latest earnings update in December 2018, which signalled that the company faced a slight headwind with earnings falling from AU$231m to AU$222m, a change of -3.8%. Below is a brief commentary on my key takeaways on how market analysts perceive OZ Minerals's earnings growth outlook over the next few years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts' expectations for the upcoming year seems pessimistic, with earnings reducing by a double-digit -19%. However, the next few years show a contrast, with earnings growth becoming positive in 2021, with the bottom line increasing to AU$315m in 2022.
Although it is informative knowing the growth each year relative to today’s figure, it may be more insightful gauging the rate at which the company is moving every year, on average. The benefit of this technique is that we can get a better picture of the direction of OZ Minerals's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I've inserted a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 9.7%. This means that, we can assume OZ Minerals will grow its earnings by 9.7% every year for the next couple of years.
For OZ Minerals, there are three key factors 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 OZL 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 OZL is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of OZL? 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.