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What Should Investors Know About QinetiQ Group plc's (LON:QQ.) Future?

Simply Wall St

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The most recent earnings update QinetiQ Group plc's (LON:QQ.) released in March 2019 signalled that the company faced a substantial headwind with earnings falling by -18%. Below, I've laid out key growth figures on how market analysts perceive QinetiQ Group's earnings growth outlook over the next couple of years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.

See our latest analysis for QinetiQ Group

Market analysts' prospects for next year seems pessimistic, with earnings falling by -6.0%. Beyond this, earnings are expected to continue to be below today's level, with a fall of -2.5% in 2021, eventually reaching UK£111m in 2022.

LSE:QQ. Past and Future Earnings, June 6th 2019

Even though it is helpful to be aware of the rate of growth year by year relative to today’s figure, it may be more valuable gauging the rate at which the business is growing on average every year. The pro of this approach is that we can get a better picture of the direction of QinetiQ Group's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I put 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 0.7%. This means that, we can presume QinetiQ Group will grow its earnings by 0.7% every year for the next couple of years.

Next Steps:

For QinetiQ Group, there are three relevant 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 QQ. 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 QQ. is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of QQ.? 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.