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In April 2019, Forterra plc (LON:FORT) announced its most recent earnings update, which showed that the business gained from a strong tailwind, leading to a double-digit earnings growth of 11%. Below is a brief commentary on my key takeaways on how market analysts view Forterra's earnings growth trajectory over the next couple of 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.
Analysts' outlook for this coming year seems rather muted, with earnings climbing by a single digit 6.3%. The growth outlook in the following year seems much more buoyant with rates arriving at double digit 11% compared to today’s earnings, and finally hitting UK£61m by 2022.
Even though it’s helpful to understand the rate of growth each year relative to today’s value, it may be more valuable to evaluate the rate at which the earnings are moving on average every year. The benefit of this method is that we can get a better picture of the direction of Forterra'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 5.3%. This means, we can expect Forterra will grow its earnings by 5.3% every year for the next couple of years.
For Forterra, I've compiled three relevant 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 FORT 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 FORT is currently mispriced by the market.
Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of FORT? 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.