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In December 2018, XP Power Limited (LON:XPP) announced its most recent earnings update, which indicated that the company gained from a slight tailwind, eventuating to a single-digit earnings growth of 6.7%. Investors may find it useful to understand how market analysts view XP Power's earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Analysts' expectations for next year seems rather muted, with earnings increasing by a single digit 7.0%. The growth outlook in the following year seems much more optimistic with rates generating double digit 16% compared to today’s earnings, and finally hitting UK£38m by 2022.
Even though it’s helpful to understand the rate of growth year by year relative to today’s figure, it may be more valuable to determine the rate at which the company is moving on average every year. The benefit of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of XP Power's earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I've appended 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 7.9%. This means, we can presume XP Power will grow its earnings by 7.9% every year for the next few years.
For XP Power, I've put together three relevant factors you should further research:
- 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.
- Valuation: What is XPP 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 XPP is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of XPP? 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 firstname.lastname@example.org. 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.