After Grainger plc’s (LON:GRI) recent earnings announcement in March 2018, the consensus outlook from analysts appear bearish, with profits predicted to drop by -2.5% next year compared with the past 5-year average growth rate of 21.7%. Presently, with latest-twelve-month earnings at UK£81.9m, we should see this fall to UK£79.8m by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. For those interested in more of an analysis of the company, you can research its fundamentals here.
What can we expect from Grainger in the longer term?
The longer term expectations from the 3 analysts of GRI is tilted towards the positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly 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 GRI’s earnings growth over these next few years.
From the current net income level of UK£73.5m and the final forecast of UK£87.0m by 2021, the annual rate of growth for GRI’s earnings is 9.0%. This leads to an EPS of £0.23 in the final year of projections relative to the current EPS of £0.18. The primary reason for earnings growth is due to cost-cutting initiatives, since top-line is predicted to rise at a slower pace than earnings. Margins is currently sitting at 27.8%, which is expected to expand to 106% by 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For Grainger, I’ve put together 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 Grainger 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 Grainger is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Grainger? 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 firstname.lastname@example.org.