SEGRO Plc (LON:SGRO): Are Analysts’ Earnings Forecast Signalling Trouble Ahead?

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The most recent earnings release SEGRO Plc’s (LON:SGRO) announced in December 2018 signalled that the business gained from a robust tailwind, leading to a double-digit earnings growth of 12%. Below, I’ve laid out key growth figures on how market analysts perceive SEGRO’s earnings growth outlook 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.

See our latest analysis for SEGRO

Market analysts’ consensus outlook for the upcoming year seems pessimistic, with earnings decreasing by a double-digit -26%. Over the medium term, earnings should continue to be below today’s level, with a decline of -36% in 2021, eventually reaching UK£680m in 2022.

LSE:SGRO Future Profit February 18th 19

While it’s helpful to understand the growth each year relative to today’s value, it may be more insightful evaluating the rate at which the business is rising or falling every year, on average. The advantage of this method is that we can get a better picture of the direction of SEGRO’s earnings trajectory over the long run, irrespective of near term fluctuations, fluctuate up and down. 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 -16%. This means, we can presume SEGRO will chip away at a rate of -16% every year for the next couple of years.

Next Steps:

For SEGRO, I’ve compiled three fundamental aspects you should look at:

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 SGRO 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 SGRO is currently mispriced by the market.

3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of SGRO? 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. On rare occasion, data errors may occur. Thank you for reading.