The latest earnings update Prudential plc’s (LSE:PRU) released in June 2017 indicated that the business faced a significant headwind with earnings falling by -25.51%. Below, I’ve laid out key growth figures on how market analysts predict Prudential’s earnings growth outlook over the next couple of 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. View our latest analysis for Prudential
Analysts’ expectations for this coming year seems positive, with earnings growing by a robust 31.39%. This growth seems to continue into the following year with rates reaching double digit 46.59% compared to today’s earnings, and finally hitting £4,383.0M by 2020.
While it is informative knowing the growth each year relative to today’s value, it may be more insightful determining the rate at which the earnings are growing every year, on average. The benefit of this approach is that it ignores near term flucuations and accounts for the overarching direction of Prudential’s earnings trajectory over time, which may be more relevant for long term investors. To calculate 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 10.78%. This means, we can expect Prudential will grow its earnings by 10.78% every year for the next couple of years.
Next Steps:
For Prudential, there are three essential aspects you should further examine:
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 PRU 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 PRU is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of PRU? 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.