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Johnson Matthey Plc's (LON:JMAT) most recent earnings update in June 2019 showed that the business gained from a strong tailwind, eventuating to a double-digit earnings growth of 39%. Below, I've presented key growth figures on how market analysts perceive Johnson Matthey's earnings growth outlook over the next few 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' outlook for the coming year seems rather muted, with earnings growing by a single digit 6.0%. The growth outlook in the following year seems much more positive with rates generating double digit 14% compared to today’s earnings, and finally hitting UK£509m by 2022.
Although it’s helpful to understand the growth rate each year relative to today’s level, it may be more beneficial to gauge the rate at which the business is growing on average every year. The pro of this approach is that it ignores near term flucuations and accounts for the overarching direction of Johnson Matthey's earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I've inserted 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 7.4%. This means, we can anticipate Johnson Matthey will grow its earnings by 7.4% every year for the next few years.
For Johnson Matthey, I've compiled 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 JMAT 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 JMAT is currently mispriced by the market.
Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of JMAT? 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.