In December 2018, Rambus Inc. (NASDAQ:RMBS) announced its most recent earnings update, which showed company earnings became less negative compared to the previous year's level as a result of recent tailwinds Investors may find it useful to understand how market analysts perceive Rambus's earnings growth trajectory over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Analysts' expectations for the upcoming year seems buoyant, with earnings becoming less negative, arriving at -US$55.9m in 2020. In the following year, earnings are expected to remain flat before dwindling to -US$32.7m in 2022.
Even though it is helpful to be aware of the growth rate each year relative to today’s value, it may be more beneficial analyzing the rate at which the business is growing every year, on average. The pro of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of Rambus's earnings trajectory over time, fluctuate up and down. To calculate this rate, I put 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 49%. This means that, we can assume Rambus will grow its earnings by 49% every year for the next couple of years.
For Rambus, there are three pertinent 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 RMBS 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 RMBS is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of RMBS? 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.
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