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As Contact Energy Limited (NZSE:CEN) released its earnings announcement on 31 December 2018, analyst consensus outlook appear cautiously optimistic, with earnings expected to grow by 35% in the upcoming year relative to the past 5-year average growth rate of -13%. Currently with trailing-twelve-month earnings of NZ$112m, we can expect this to reach NZ$152m by 2020. Below is a brief commentary around Contact Energy’s earnings outlook going forward, which may give you a sense of market sentiment for the company. For those interested in more of an analysis of the company, you can research its fundamentals here.
Check out our latest analysis for Contact Energy
How will Contact Energy perform in the near future?
The longer term expectations from the 7 analysts of CEN is tilted towards the negative sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To get an idea of the overall earnings growth trend for CEN, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
By 2022, CEN’s earnings should reach NZ$126m, from current levels of NZ$112m, resulting in an annual growth rate of -16%. However, if we exclude extraordinary items from earnings, we see that the profits is predicted to rise over time, resulting in an EPS of NZ$0.26 in the final year of forecast compared to the current NZ$0.16 EPS today. Contraction in the bottom line seems to suggest a falling top-line, with negative growth of -4.4%. However, the current margin of 5.2% is expected to expand to 6.2% by 2022.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Contact Energy, there are three pertinent factors you should further research:
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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.
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Valuation: What is Contact Energy 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 Contact Energy is currently mispriced by the market.
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Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Contact Energy? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.