Tempur Sealy International, Inc.’s (NYSE:TPX) most recent earnings update in December 2018 indicated that the business experienced a major headwind with earnings declining by -35%. Investors may find it useful to understand how market analysts perceive Tempur Sealy International’s earnings growth outlook 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.
Analysts’ expectations for next year seems positive, with earnings expanding by a significant 59%. This high growth in earnings is expected to continue, bringing the bottom line up to US$250m by 2022.
While it is helpful to understand the growth rate year by year relative to today’s level, it may be more insightful estimating the rate at which the earnings are moving on average every year. The benefit of this approach is that we can get a better picture of the direction of Tempur Sealy International’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 15%. This means that, we can anticipate Tempur Sealy International will grow its earnings by 15% every year for the next few years.
For Tempur Sealy International, I’ve compiled 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 TPX 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 TPX is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of TPX? 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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If you spot an error that warrants correction, please contact the editor at email@example.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.