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Severn Trent Plc (LON:SVT): Poised For Long-Term Success?

Simply Wall St

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The latest earnings release Severn Trent Plc's (LON:SVT) announced in March 2019 suggested that the company gained from a robust tailwind, leading to a double-digit earnings growth of 31%. Below, I've presented key growth figures on how market analysts perceive Severn Trent's earnings growth outlook over the next few years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.

View our latest analysis for Severn Trent

Analysts' expectations for the coming year seems pessimistic, with earnings decreasing by -6.9%. Over the medium term, earnings are expected to continue to be below today's level, with a reduction of -16% in 2021, eventually reaching UK£266m in 2022.

LSE:SVT Past and Future Earnings, May 30th 2019

Although it is helpful to be aware of the growth rate each year relative to today’s level, it may be more beneficial to analyze the rate at which the business is growing every year, on average. The pro of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of Severn Trent's earnings trajectory over time, fluctuate up and down. To calculate this rate, I've inserted 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 2.2%. This means that, we can anticipate Severn Trent will grow its earnings by 2.2% every year for the next couple of years.

Next Steps:

For Severn Trent, I've put together three relevant 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 SVT 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 SVT is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of SVT? 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.