The most recent earnings release Rogers Communications Inc.'s (TSE:RCI.B) announced in December 2018 confirmed that the company experienced a strong tailwind, eventuating to a double-digit earnings growth of 12%. Below is my commentary, albeit very simple and high-level, on how market analysts perceive Rogers Communications's earnings growth trajectory 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.
Analysts' expectations for this coming year seems buoyant, with earnings rising by a robust 12%. This growth seems to continue into the following year with rates arriving at double digit 20% compared to today’s earnings, and finally hitting CA$2.9b by 2022.
Although it’s informative understanding the growth year by year relative to today’s value, it may be more insightful evaluating the rate at which the company is growing every year, on average. The pro of this technique is that it ignores near term flucuations and accounts for the overarching direction of Rogers Communications's earnings trajectory over time, which may be more relevant for long term investors. To compute 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 9.5%. This means that, we can assume Rogers Communications will grow its earnings by 9.5% every year for the next few years.
For Rogers Communications, there are three important factors you should further research:
- 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 RCI.B 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 RCI.B is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of RCI.B? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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