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New Relic, Inc. (NYSE:NEWR): What Are The Future Prospects?

Simply Wall St

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The latest earnings release New Relic, Inc.'s (NYSE:NEWR) announced in March 2019 suggested company earnings became less negative compared to the previous year's level as a result of recent tailwinds Below, I've laid out key numbers on how market analysts perceive New Relic's earnings growth outlook over the next few years and whether the future looks brighter. 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.

Check out our latest analysis for New Relic

Analysts' outlook for this coming year seems pessimistic, with earnings becoming even more negative, reaching -US$50.1m in 2020. Moreover, earnings should fall off in the following year, falling to -US$27.2m in 2021 and -US$20.4m in 2022.

NYSE:NEWR Past and Future Earnings, June 9th 2019

Even though it’s helpful to be aware of the rate of growth each year relative to today’s value, it may be more beneficial to estimate the rate at which the earnings are moving every year, on average. The benefit of this approach is that we can get a bigger picture of the direction of New Relic's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I put 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 19%. This means that, we can assume New Relic will grow its earnings by 19% every year for the next few years.

Next Steps:

For New Relic, I've put together three essential factors you should further examine:

  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 NEWR 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 NEWR is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of NEWR? 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 editorial-team@simplywallst.com. 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.