In September 2017, Barclays PLC (LSE:BARC) released its latest earnings announcement, which confirmed that the company turned profitable again after experiencing losses in the previous financial year. Today I want to provide a brief commentary on how market analysts view Barclays’s earnings growth trajectory over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings. See our latest analysis for Barclays
Analysts’ expectations for this coming year seems pessimistic, with earnings decreasing by -1.10%. But in the following year, there is a complete contrast in performance, with reaching double digit 66.95% compared to today’s level and continues to increase to £3,676.9M in 2020.
Even though it is useful to be aware of the growth each year relative to today’s value, it may be more valuable evaluating the rate at which the company is moving on average every year. The advantage of this method is that we can get a bigger picture of the direction of Barclays’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute 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 58.18%. This means that, we can assume Barclays will grow its earnings by 58.18% every year for the next couple of years.
Next Steps:
For Barclays, I’ve put together three essential 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 BARC 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 BARC is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of BARC? 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.