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Looking at NEXT plc’s (LON:NXT) earnings update in January 2018, it seems that analyst forecasts are fairly pessimistic, as a -0.2% fall in profits is expected in the upcoming year relative to the past 5-year average growth rate of 3.5%. Presently, with latest-twelve-month earnings at UK£591.8m, we should see this fall to UK£590.5m by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. For those interested in more of an analysis of the company, you can research its fundamentals here.
Check out our latest analysis for NEXT
How is NEXT going to perform in the near future?
The longer term expectations from the 15 analysts of NXT is tilted towards the positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of NXT’s earnings growth over these next few years.
By 2021, NXT’s earnings should reach UK£601.1m, from current levels of UK£591.8m, resulting in an annual growth rate of 0.6%. EPS reaches £4.69 in the final year of forecast compared to the current £4.17 EPS today. Growth in earnings appears to be a result of revenue expansion of 2.1% exceeeding cost growth over time. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 14.6% to 14.0% by the end of 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For NEXT, I’ve compiled three key factors you should further examine:
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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 NEXT 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 NEXT 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 NEXT? 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.