Parker-Hannifin Corporation's (NYSE:PH) most recent earnings update in August 2019 indicated that the business gained from a robust tailwind, eventuating to a double-digit earnings growth of 43%. Below, I've laid out key numbers on how market analysts view Parker-Hannifin's earnings growth outlook over the next few years and whether the future looks even brighter than the past. 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.
Market analysts' consensus outlook for the upcoming year seems rather muted, with earnings expanding by a single digit 1.7%. The following year doesn't look much more exciting, though earnings does reach US$1.7b in 2022.
Even though it’s helpful to be aware of the growth each year relative to today’s figure, it may be more valuable determining the rate at which the company is growing every year, on average. The benefit of this approach is that it ignores near term flucuations and accounts for the overarching direction of Parker-Hannifin's earnings trajectory over time, which may be more relevant for long term investors. 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 2.8%. This means, we can assume Parker-Hannifin will grow its earnings by 2.8% every year for the next couple of years.
For Parker-Hannifin, there are three essential aspects you should further examine:
- 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 PH 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 PH is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of PH? 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.