BP plc’s (LSE:BP.) announced its latest earnings update in September 2017, which revealed that the business turned profitable again after experiencing losses in the previous financial year. Below, I’ve presented key growth figures on how market analysts predict BP’s earnings growth trajectory 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. See our latest analysis for BP
Analysts’ expectations for the coming year seems optimistic, with earnings growing by a significant 88.59%. This strong growth in earnings is expected to continue, bringing the bottom line up to $9,995.3M by 2020.
Even though it’s useful to understand the growth rate each year relative to today’s figure, it may be more insightful evaluating the rate at which the earnings are growing on average every year. The pro of this approach is that it ignores near term flucuations and accounts for the overarching direction of BP’s earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I’ve appended 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 20.00%. This means, we can anticipate BP will grow its earnings by 20.00% every year for the next couple of years.
Next Steps:
For BP, there are three pertinent aspects you should further examine:
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 BP. 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 BP. is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of BP.? 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.