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In September 2018, Victrex plc (LON:VCT) announced its latest earnings update, which indicated that the company benefited from a strong tailwind, leading to a double-digit earnings growth of 11%. Below is a brief commentary on my key takeaways on how market analysts view Victrex's earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. 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' outlook for next year seems pessimistic, with earnings declining by -2.4%. But in the following year, there is a complete contrast in performance, with arriving at double digit 2.6% compared to today’s level and continues to increase to UK£119m in 2022.
Although it’s useful to understand the rate of growth each year relative to today’s value, it may be more beneficial determining the rate at which the business is rising or falling every year, on average. The benefit of this approach is that we can get a better picture of the direction of Victrex'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 2.4%. This means, we can presume Victrex will grow its earnings by 2.4% every year for the next few years.
For Victrex, there are three relevant factors you should further examine:
- 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 VCT 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 VCT is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of VCT? 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 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.