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MTU Aero Engines AG's (ETR:MTX) announced its latest earnings update in December 2018, which signalled that the company experienced a robust tailwind, eventuating to a double-digit earnings growth of 26%. Investors may find it useful to understand how market analysts predict MTU Aero Engines's earnings growth trajectory over the next few years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Market analysts' consensus outlook for next year seems rather muted, with earnings rising by a single digit 8.5%. The growth outlook in the following year seems much more optimistic with rates generating double digit 20% compared to today’s earnings, and finally hitting €598m by 2022.
Even though it’s helpful to be aware of the growth rate year by year relative to today’s level, it may be more insightful to determine the rate at which the business is moving every year, on average. The benefit of this method is that we can get a bigger picture of the direction of MTU Aero Engines'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 the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 7.7%. This means that, we can anticipate MTU Aero Engines will grow its earnings by 7.7% every year for the next couple of years.
For MTU Aero Engines, there are three relevant 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 MTX 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 MTX is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of MTX? 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.