Yahoo Finance What Should Investors Know About WPP plc's (LON:WPP) Future?
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The most recent earnings update WPP plc's (LON:WPP) released in December 2018 signalled that the business endured a major headwind with earnings declining by -41%. Below, I've presented key growth figures on how market analysts predict WPP's earnings growth trajectory over the next few years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Check out our latest analysis for WPP
Analysts' outlook for next year seems pessimistic, with earnings reducing by -4.5%. But in the following year, there is a complete contrast in performance, with reaching double digit 7.4% compared to today’s level and continues to increase to UK£1.2b in 2022.
Although it is helpful to be aware of the growth year by year relative to today’s level, it may be more insightful determining the rate at which the earnings are rising or falling every year, on average. The benefit of this approach is that we can get a better picture of the direction of WPP'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've inserted 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 4.9%. This means that, we can anticipate WPP will grow its earnings by 4.9% every year for the next couple of years.
Next Steps:
For WPP, there are three important aspects you should further research:
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 WPP 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 WPP is currently mispriced by the market.
Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of WPP? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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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.
