Will Origin Energy Limited's (ASX:ORG) Earnings Grow Over The Next Year?
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Since Origin Energy Limited (ASX:ORG) released its earnings in December 2018, the consensus outlook from analysts appear pessimistic, with profits predicted to drop by 4.3% next year. Though this is still an improvement on its past 5-year earnings growth rate of -5.9%, on average. With trailing-twelve-month net income at current levels of AU$280m, the consensus growth rate suggests that earnings will decline to AU$268m by 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Origin Energy in the longer term. For those interested in more of an analysis of the company, you can research its fundamentals here.
Check out our latest analysis for Origin Energy
What can we expect from Origin Energy in the longer term?
Over the next three years, it seems the consensus view of the 11 analysts covering ORG is skewed towards the negative sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of ORG's earnings growth over these next few years.
From the current net income level of AU$280m and the final forecast of AU$254m by 2022, the annual rate of growth for ORG’s earnings is -3.0%. However, if we exclude extraordinary items from earnings, we see that the profits is predicted to rise over time, resulting in an EPS of A$0.67 in the final year of forecast compared to the current A$0.16 EPS today. Contraction in the bottom line seems to suggest revenue declining at an average annual rate of -0.8%. Furthermore, the current 1.9% margin is expected to contract to 1.8% by the end of 2022.
Next Steps:
Future outlook is only one aspect when you're building an investment case for a stock. For Origin Energy, there are three pertinent 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 Origin Energy 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 Origin Energy is currently mispriced by the market.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Origin Energy? 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. Thank you for reading.
