After NOW Inc.'s (NYSE:DNOW) earnings announcement in December 2018, the consensus outlook from analysts appear fairly confident, with profits predicted to increase by -10.0% next year relative to the past 5-year average growth rate of -17%. Currently with trailing-twelve-month earnings of US$51m, we can expect this to reach US$46m by 2020. Below is a brief commentary on the longer term outlook the market has for NOW. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
Can we expect NOW to keep growing?
The longer term expectations from the 11 analysts of DNOW is tilted towards the positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To understand the overall trajectory of DNOW's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
From the current net income level of US$51m and the final forecast of US$85m by 2022, the annual rate of growth for DNOW’s earnings is 20%. This leads to an EPS of $0.75 in the final year of projections relative to the current EPS of $0.47. With a current profit margin of 1.6%, this movement will result in a margin of 2.5% by 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For NOW, I've compiled three fundamental 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 NOW 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 NOW is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of NOW? 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 firstname.lastname@example.org. 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.