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Will The Timken Company's (NYSE:TKR) Earnings Grow In The Next Couple Of Years?

Simply Wall St

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In December 2018, The Timken Company (NYSE:TKR) announced its latest earnings update, which indicated that the company experienced a strong tailwind, eventuating to a double-digit earnings growth of 49%. Today I want to provide a brief commentary on how market analysts predict Timken's earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.

Check out our latest analysis for Timken

Analysts' outlook for the coming year seems positive, with earnings rising by a robust 21%. This growth seems to continue into the following year with rates reaching double digit 32% compared to today’s earnings, and finally hitting US$450m by 2022.

NYSE:TKR Past and Future Earnings, April 6th 2019

Even though it’s informative knowing the growth year by year relative to today’s level, it may be more insightful to gauge the rate at which the company is rising or falling every year, on average. The advantage of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of Timken's earnings trajectory over time, which may be more relevant for long term investors. To compute 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 12%. This means, we can assume Timken will grow its earnings by 12% every year for the next couple of years.

Next Steps:

For Timken, there are three relevant aspects you should further research:

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