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Will Direct Line Insurance Group plc's (LON:DLG) Earnings Grow In Next 12 Months?

Simply Wall St

Since Direct Line Insurance Group plc (LON:DLG) released its earnings in December 2018, analyst forecasts seem bearish, with earnings expected to decline by 17% in the upcoming year compared with the past 5-year average growth rate of 3.8%. With trailing-twelve-month net income at current levels of UK£457m, the consensus growth rate suggests that earnings will decline to UK£379m by 2020. Below is a brief commentary around Direct Line Insurance Group's earnings outlook going forward, which may give you a sense of market sentiment for the company. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

View our latest analysis for Direct Line Insurance Group

Exciting times ahead?

Longer term expectations from the 14 analysts covering DLG’s stock is one of negative sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To understand the overall trajectory of DLG's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

LSE:DLG Past and Future Earnings, July 30th 2019

By 2022, DLG's earnings should reach UK£417m, from current levels of UK£457m, resulting in an annual growth rate of -2.1%. EPS reaches £0.28 in the final year of forecast compared to the current £0.33 EPS today. The bottom-line decline seems to be caused by a falling top-line, with negative growth of -1.7%. By 2022, margins are projected to decline from 13% to 13% as a result in a faster fall in profits.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Direct Line Insurance Group, there are three essential factors you should further research:

  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 Direct Line Insurance Group 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 Direct Line Insurance Group is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Direct Line Insurance Group? 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.