In June 2018, Persimmon Plc (LON:PSN) announced its earnings update. Overall, analysts seem cautiously bearish, with profits predicted to rise by 3.5% next year relative to the higher past 5-year average growth rate of 25%. With trailing-twelve-month net income at current levels of UK£787m, we should see this rise to UK£814m in 2019. Below is a brief commentary around Persimmon’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
Can we expect Persimmon to keep growing?
The longer term expectations from the 15 analysts of PSN is tilted towards the positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To understand the overall trajectory of PSN’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.
By 2021, PSN’s earnings should reach UK£870m, from current levels of UK£787m, resulting in an annual growth rate of 2.5%. EPS reaches £2.9 in the final year of forecast compared to the current £2.55 EPS today. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 23% to 22% by the end of 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For Persimmon, I’ve compiled three relevant 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 Persimmon 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 Persimmon is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Persimmon? 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 email@example.com.