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Meggitt PLC's (LON:MGGT) most recent earnings announcement in December 2018 revealed that the company experienced a immense headwind with earnings deteriorating by -39%. Today I want to provide a brief commentary on how market analysts predict Meggitt's earnings growth outlook over the next few years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts' expectations for this coming year seems buoyant, with earnings climbing by a robust 12%. This growth seems to continue into the following year with rates reaching double digit 27% compared to today’s earnings, and finally hitting UK£260m by 2022.
Even though it’s helpful to understand the growth year by year relative to today’s figure, it may be more beneficial determining the rate at which the company is growing every year, on average. The advantage of this approach is that we can get a better picture of the direction of Meggitt'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 put a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 11%. This means that, we can anticipate Meggitt will grow its earnings by 11% every year for the next few years.
For Meggitt, there are three key 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 MGGT 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 MGGT is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of MGGT? 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 firstname.lastname@example.org. 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.