Barratt Developments plc’s (LSE:BDEV) latest earnings announcement in June 2017 indicated that the business experienced a robust tailwind, leading to a double-digit earnings growth of 11.90%. Today I want to provide a brief commentary on how market analysts view Barratt Developments’s earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings. Check out our latest analysis for Barratt Developments
Market analysts’ consensus outlook for next year seems rather muted, with earnings rising by a single digit 7.20%. The growth outlook in the following year seems much more optimistic with rates arriving at double digit 13.51% compared to today’s earnings, and finally hitting £763.0M by 2020.
While it is useful to understand the growth rate year by year relative to today’s figure, it may be more valuable to estimate the rate at which the earnings are rising or falling on average every year. The advantage of this technique is that it ignores near term flucuations and accounts for the overarching direction of Barratt Developments’s earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I’ve inserted 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 7.04%. This means, we can assume Barratt Developments will grow its earnings by 7.04% every year for the next few years.
Next Steps:
For Barratt Developments, there are three pertinent aspects you should look at:
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 BDEV 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 BDEV is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of BDEV? 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.