Johnson Matthey Plc’s (LSE:JMAT) released its most recent earnings update in September 2017, which confirmed that the business benefited from a robust tailwind, leading to a double-digit earnings growth of 15.88%. Investors may find it useful to understand how market analysts perceive Johnson Matthey’s earnings growth outlook over the next few 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. View our latest analysis for Johnson Matthey
Analysts’ outlook for the upcoming year seems rather muted, with earnings increasing by a single digit 3.06%. The growth outlook in the following year seems much more positive with rates generating double digit 18.37% compared to today’s earnings, and finally hitting £480.6M by 2020.
Although it is helpful to understand the growth year by year relative to today’s figure, it may be more insightful to gauge the rate at which the business is growing on average every year. The benefit of this approach is that we can get a bigger picture of the direction of Johnson Matthey’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 put a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 10.89%. This means, we can expect Johnson Matthey will grow its earnings by 10.89% every year for the next couple of years.
Next Steps:
For Johnson Matthey, I’ve put together three key 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 JMAT 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 JMAT is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of JMAT? 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.