Acuity Brands Inc’s (NYSE:AYI) latest earnings announcement in August 2017 indicated that the business gained from a strong tailwind, leading to a double-digit earnings growth of 10.78%. Today I want to provide a brief commentary on how market analysts view Acuity Brands’s earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings. View our latest analysis for Acuity Brands
Market analysts’ consensus outlook for this coming year seems rather muted, with earnings increasing by a single digit 6.18%. The growth outlook in the following year seems much more buoyant with rates reaching double digit 15.93% compared to today’s earnings, and finally hitting $378.1M by 2020.
While it’s useful to be aware of the rate of growth year by year relative to today’s value, it may be more beneficial evaluating the rate at which the business is rising or falling every year, on average. The advantage of this technique is that we can get a bigger picture of the direction of Acuity Brands’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’ve appended 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 6.59%. This means, we can presume Acuity Brands will grow its earnings by 6.59% every year for the next few years.
Next Steps:
For Acuity Brands, I’ve put together three essential factors 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 AYI 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 AYI is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of AYI? 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.