After Steel Dynamics, Inc.’s (NASDAQ:STLD) recent earnings announcement in September 2018, analyst forecasts seem pessimistic, with profits predicted to drop by -14% next year compared with the past 5-year average growth rate of 47%. With trailing-twelve-month net income at current levels of US$813m, the consensus growth rate suggests that earnings will decline to US$698m by 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Steel Dynamics in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
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Can we expect Steel Dynamics to keep growing?
The 14 analysts covering STLD view its longer term outlook with a negative sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To get an idea of the overall earnings growth trend for STLD, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
By 2022, STLD’s earnings should reach US$480m, from current levels of US$813m, resulting in an annual growth rate of -20%. This leads to an EPS of $3.27 in the final year of projections relative to the current EPS of $3.38. The bottom-line decline seems to be caused by a reduction in the top line of -2.0%, squeezing the bottom line. Furthermore, the current 8.5% margin is expected to contract to 5.3% by the end of 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Steel Dynamics, I’ve compiled three essential 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 Steel Dynamics 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 Steel Dynamics is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Steel Dynamics? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.