The most recent earnings update Shire plc’s (LSE:SHP) released in September 2017 indicated that the business experienced a major headwind with earnings deteriorating by -54.88%. Below, I’ve presented key growth figures on how market analysts view Shire’s earnings growth trajectory 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. Check out our latest analysis for Shire
Market analysts’ consensus outlook for the coming year seems buoyant, with earnings rising by a significant 88.16%. This strong growth in earnings is expected to continue, bringing the bottom line up to $4,694.3M by 2020.
Although it is helpful to be aware of the growth year by year relative to today’s figure, it may be more beneficial gauging the rate at which the earnings are moving on average every year. The advantage of this technique is that we can get a bigger picture of the direction of Shire’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate 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 25.34%. This means, we can presume Shire will grow its earnings by 25.34% every year for the next few years.
Next Steps:
For Shire, I’ve put together three relevant 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 SHP 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 SHP is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of SHP? 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.