In June 2017, Mineral Resources Limited (ASX:MIN) released its latest earnings announcement, which indicated that the business turned profitable again after experiencing losses in the previous financial year. Investors may find it useful to understand how market analysts predict Mineral Resources’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. See our latest analysis for Mineral Resources
Market analysts’ consensus outlook for the coming year seems positive, with earnings growing by a robust 16.63%. This growth seems to continue into the following year with rates arriving at double digit 38.46% compared to today’s earnings, and finally hitting A$338.6M by 2020.
Even though it’s informative understanding the rate of growth year by year relative to today’s figure, it may be more beneficial to determine the rate at which the business is growing every year, on average. The pro of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of Mineral Resources’s earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I put a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 4.79%. This means that, we can presume Mineral Resources will grow its earnings by 4.79% every year for the next few years.
Next Steps:
For Mineral Resources, I’ve compiled three relevant 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 MIN 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 MIN is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of MIN? 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.