Woolworths Limited (ASX:WOW): Poised For Long-Term Success?
Woolworths Limited (ASX:WOW)’s sound earnings growth per share is expected to be a double-digit 35.52% over the next three years. At a current EPS of A$1.108, this growth rate means shareholders can expect an impending EPS of A$1.501. I am going to look at the latest data on WOW to assess whether this expected growth is reasonable. Check out our latest analysis for Woolworths
What can we expect from Woolworths Limited (ASX:WOW) in the future?
Analyst expectation from the stock’s 12 analysts is one of positive sentiment, with earnings estimated to expand from current levels of A$1.108 to A$1.501 over the next couple of years. This illustrates a relatively optimistic outlook in the near term, with a relatively solid earnings per share growth rate of 35.52% over the next few years. During the same time we will see the revenue increase from A$55,669M to A$61,655M and profits (net income) are predicted to slightly grow from A$1,422M to A$1,927M in the next couple of years, growing by 35.52%. Though, at the current levels of revenue and profit, margins are certainly underwhelming.
Basis for the growth
The past can be a helpful indicator for future performance for a stock. We can determine whether this level of expected growth is highly excessive or whether the company has consistently exhibited strength. However, WOW’s earnings growth in the past couple of years has been negative at -18.51%. Although its past performance is not supportive of a positive growth trend, it could also mean WOW is growing off a lower base, meaning a higher growth rate is easier to achieve. This sign change in growth could indicate a turnaround initiative.
Next Steps:
For WOW, there are three pertinent 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 WOW 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 WOW is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of WOW? 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 pass 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.
