On 30 September 2018, Westpac Banking Corporation (ASX:WBC) announced its earnings update. Overall, it seems that analyst forecasts are fairly optimistic, with earnings expected to grow by 4.7% in the upcoming year against the past 5-year average growth rate of 2.9%. By 2019, we can expect Westpac Banking’s bottom line to reach AU$8.5b, a jump from the current trailing-twelve-month AU$8.1b. Below is a brief commentary around Westpac Banking’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
How is Westpac Banking going to perform in the near future?
The longer term expectations from the 14 analysts of WBC is tilted towards the positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of WBC’s earnings growth over these next few years.
By 2021, WBC’s earnings should reach AU$9.1b, from current levels of AU$8.1b, resulting in an annual growth rate of 4.0%. EPS reaches A$2.64 in the final year of forecast compared to the current A$2.38 EPS today. The primary reason for earnings growth is due to cost-cutting initiatives, since top-line is predicted to rise at a slower pace than earnings. In 2021, WBC’s profit margin will have expanded from 38% to 38%.
Future outlook is only one aspect when you’re building an investment case for a stock. For Westpac Banking, I’ve put together three fundamental aspects you should look at:
- 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 Westpac Banking 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 Westpac Banking is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Westpac Banking? 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 firstname.lastname@example.org.