What Should We Expect From NZME Limited's (NZSE:NZM) Earnings In The Years Ahead?
In December 2018, NZME Limited (NZSE:NZM) released its most recent earnings announcement, which revealed that the company faced a immense headwind with earnings declining by -44%. Investors may find it useful to understand how market analysts perceive NZME's earnings growth trajectory over the next couple of years and whether the future looks brighter. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Check out our latest analysis for NZME
Analysts' outlook for the coming year seems rather muted, with earnings rising by a single digit 0.7%. The growth outlook in the following year seems much more positive with rates arriving at double digit 11% compared to today’s earnings, and finally hitting NZ$14m by 2022.
Although it’s informative knowing the rate of growth each year relative to today’s level, it may be more insightful to evaluate the rate at which the earnings are growing on average every year. The pro of this technique is that we can get a better picture of the direction of NZME'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 6.4%. This means, we can presume NZME will grow its earnings by 6.4% every year for the next few years.
Next Steps:
For NZME, I've compiled three key factors 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 NZM 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 NZM is currently mispriced by the market.
Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of NZM? 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.
