Yahoo Finance Diageo plc (LON:DGE): What We Can Expect From This Growth Stock
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Based on Diageo plc's (LON:DGE) earnings update in December 2018, analysts seem cautiously optimistic, with profits predicted to increase by 8.3% next year relative to the past 5-year average growth rate of 6.7%. By 2020, we can expect Diageo’s bottom line to reach UK£3.3b, a jump from the current trailing-twelve-month of UK£3.0b. I will provide a brief commentary around the figures and analyst expectations in the near term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
View our latest analysis for Diageo
Exciting times ahead?
The view from 21 analysts over the next three years is one of 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 DGE's earnings growth over these next few years.
This results in an annual growth rate of 4.8% based on the most recent earnings level of UK£3.0b to the final forecast of UK£3.6b by 2022. EPS reaches £1.56 in the final year of forecast compared to the current £1.22 EPS today. Margins are currently sitting at 25%, which is expected to expand to 26% by 2022.
Next Steps:
Future outlook is only one aspect when you're building an investment case for a stock. For Diageo, there are three key factors you should further examine:
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 Diageo 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 Diageo is currently mispriced by the market.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Diageo? 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.
