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Pennon Group Plc (LON:PNN): What Does The Future Look Like?

Since Pennon Group Plc (LON:PNN) released its earnings in March 2018, analyst forecasts seem fairly subdued, as a 5.9% rise in profits is expected in the upcoming year, compared with the higher past 5-year average growth rate of 22%. Currently with trailing-twelve-month earnings of UK£201m, we can expect this to reach UK£213m by 2019. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Pennon Group in the longer term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

View our latest analysis for Pennon Group

How will Pennon Group perform in the near future?

Longer term expectations from the 10 analysts covering PNN’s stock is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To understand the overall trajectory of PNN’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

LSE:PNN Future Profit October 18th 18

By 2021, PNN’s earnings should reach UK£215m, from current levels of UK£201m, resulting in an annual growth rate of 3.5%. This leads to an EPS of £0.50 in the final year of projections relative to the current EPS of £0.48. Growth in earnings appears to be a result of cost cutting activities, as revenues is expected to grow much slower than earnings. Margins is currently sitting at 14%, which is expected to expand to 15% by 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Pennon Group, I’ve put together three pertinent aspects you should further research:

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