Yahoo Finance What Do Analysts Think About Royal Mail plc's (LON:RMG) Future?
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The latest earnings announcement Royal Mail plc (LON:RMG) released in March 2019 indicated that the business experienced a major headwind with earnings declining by -32%. Below is a brief commentary on my key takeaways on how market analysts perceive Royal Mail's earnings growth trajectory over the next couple of years and whether the future looks brighter. 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.
View our latest analysis for Royal Mail
Analysts' outlook for the coming year seems buoyant, with earnings expanding by a robust 34%. This growth seems to continue into the following year with rates arriving at double digit 44% compared to today’s earnings, and finally hitting UK£283m by 2022.
Although it is useful to understand the growth rate year by year relative to today’s level, it may be more insightful gauging the rate at which the earnings are rising or falling on average every year. The advantage of this technique is that we can get a better picture of the direction of Royal Mail'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've appended 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 15%. This means, we can presume Royal Mail will grow its earnings by 15% every year for the next few years.
Next Steps:
For Royal Mail, I've put together three fundamental aspects 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 RMG 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 RMG is currently mispriced by the market.
Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of RMG? 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 editorial-team@simplywallst.com. 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.
