Whitehaven Coal Limited (ASX:WHC): Earnings To Drop Next Year
On 31 December 2018, Whitehaven Coal Limited (ASX:WHC) announced its latest earnings update. Overall, analyst consensus outlook appear pessimistic, with profits predicted to drop by -6.1% next year compared with the past 5-year average growth rate of 64%. Presently, with latest-twelve-month earnings at AU$526m, we should see this fall to AU$494m by 2020. Below is a brief commentary on the longer term outlook the market has for Whitehaven Coal. For those interested in more of an analysis of the company, you can research its fundamentals here.
View our latest analysis for Whitehaven Coal
What can we expect from Whitehaven Coal in the longer term?
The longer term expectations from the 15 analysts of WHC is tilted towards the negative sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To understand the overall trajectory of WHC’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
This results in an annual growth rate of -18% based on the most recent earnings level of AU$526m to the final forecast of AU$370m by 2022. This leads to an EPS of A$0.41 in the final year of projections relative to the current EPS of A$0.53. The primary reason for earnings contraction is due to a falling top-line, with negative growth of -3.9%. Furthermore, the current 23% margin is expected to contract to 17% by the end of 2022.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Whitehaven Coal, I’ve put together 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 Whitehaven Coal 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 Whitehaven Coal is currently mispriced by the market.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Whitehaven Coal? 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.
