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PRA Health Sciences, Inc.’s (NASDAQ:PRAH) latest earnings update in December 2018 confirmed that the business experienced a strong tailwind, eventuating to a high double-digit earnings growth of 77%. Below is my commentary, albeit very simple and high-level, on how market analysts view PRA Health Sciences’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’ prospects for next year seems optimistic, with earnings climbing by a significant 68%. This high growth in earnings is expected to continue, bringing the bottom line up to US$352m by 2022.
Although it is useful to be aware of the growth each year relative to today’s figure, it may be more insightful to determine the rate at which the earnings are moving every year, on average. The advantage of this technique is that it ignores near term flucuations and accounts for the overarching direction of PRA Health Sciences’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 analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 25%. This means that, we can assume PRA Health Sciences will grow its earnings by 25% every year for the next couple of years.
For PRA Health Sciences, I’ve compiled three fundamental aspects you should look at:
- 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 PRAH 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 PRAH is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of PRAH? 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.