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What Should We Expect From Renishaw plc’s (LON:RSW) Earnings Over The Next Few Years?

Renishaw plc’s (LON:RSW) released its most recent earnings update in June 2018, which suggested that the company benefited from a robust tailwind, eventuating to a double-digit earnings growth of 29%. Below, I’ve presented key growth figures on how market analysts perceive Renishaw’s earnings growth outlook over the next couple of 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.

View our latest analysis for Renishaw

Analysts’ outlook for the upcoming year seems rather muted, with earnings rising by a single digit 3.8%. The growth outlook in the following year seems much more positive with rates generating double digit 15% compared to today’s earnings, and finally hitting UK£170m by 2021.

LSE:RSW Future Profit October 18th 18

While it is informative knowing the rate of growth year by year relative to today’s level, it may be more beneficial estimating the rate at which the company is moving on average every year. The benefit of this approach is that we can get a bigger picture of the direction of Renishaw’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I’ve appended a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 9.0%. This means that, we can assume Renishaw will grow its earnings by 9.0% every year for the next few years.

Next Steps:

For Renishaw, I’ve compiled 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 RSW 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 RSW is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of RSW? 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 editorial-team@simplywallst.com.