In June 2018, Renishaw plc (LON:RSW) announced its earnings update. Overall, analysts seem cautiously bearish, with profits predicted to rise by 1.2% next year compared with the higher past 5-year average growth rate of 10%. With trailing-twelve-month net income at current levels of UK£132m, we should see this rise to UK£134m in 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Renishaw in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
What can we expect from Renishaw in the longer term?
Over the next three years, it seems the consensus view of the 11 analysts covering RSW is skewed towards the positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
By 2022, RSW’s earnings should reach UK£161m, from current levels of UK£132m, resulting in an annual growth rate of 7.6%. EPS reaches £2.21 in the final year of forecast compared to the current £1.82 EPS today. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 22% to 20% by the end of 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Renishaw, I’ve compiled three relevant aspects you should look at:
- 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 Renishaw 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 Renishaw is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Renishaw? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.