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Will Spectris plc’s (LON:SXS) Earnings Grow In The Next Couple Of Years?

Simply Wall St

Spectris plc’s (LON:SXS) latest earnings announcement in December 2018 suggested that the business endured a immense headwind with earnings deteriorating by -21%. Below is my commentary, albeit very simple and high-level, on how market analysts perceive Spectris’s earnings growth trajectory over the next couple of 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.

View our latest analysis for Spectris

Analysts’ outlook for this coming year seems pessimistic, with earnings reducing by a double-digit -26%. Over the medium term, earnings will begin to improve, climbing year on year, and arriving at UK£189m by 2022.

LSE:SXS Past and Future Earnings, March 6th 2019

While it is informative knowing the rate of growth year by year relative to today’s figure, it may be more beneficial to evaluate the rate at which the business is moving every year, on average. The benefit of this approach is that we can get a bigger picture of the direction of Spectris’s earnings trajectory over the long run, irrespective of near term fluctuations, 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 0.5%. This means, we can assume Spectris will grow its earnings by 0.5% every year for the next few years.

Next Steps:

For Spectris, I’ve compiled three important factors you should look at:

  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 SXS 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 SXS is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of SXS? 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.