The latest earnings announcement Sims Metal Management Limited’s (ASX:SGM) released in June 2017 signalled that the company finally turned profitable after losses on average over the last few years. Below, I’ve presented key growth figures on how market analysts predict Sims Metal Management’s earnings growth outlook 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 Sims Metal Management

Analysts’ outlook for the coming year seems pessimistic, with earnings reducing by a double-digit -16.39%. In the next couple of years, earnings are predicted to continue to be below today’s level, with a decline of -14.58% in 2019, eventually reaching A$173.9M in 2020.

While it is useful to be aware of the rate of growth each year relative to today’s value, it may be more valuable to analyze the rate at which the earnings are moving every year, on average. The benefit of this approach is that we can get a better picture of the direction of Sims Metal Management’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 put 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 -3.23%. This means, we can assume Sims Metal Management will chip away at a rate of -3.23% every year for the next few years.

Next Steps:

For Sims Metal Management, I’ve put together three important factors 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 SGM 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 SGM is currently mispriced by the market.

3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of SGM? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.