Diamond Offshore Drilling Inc’s (NYSE:DO) most recent earnings update in December 2017 suggested that the business turned profitable again after experiencing losses in the last financial year. Today I want to provide a brief commentary on how market analysts perceive Diamond Offshore Drilling’s earnings growth trajectory over the next few years and whether the future looks brighter. 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 Diamond Offshore Drilling

Analysts’ outlook for this coming year seems pessimistic, with earnings turning into a loss in 2019. DO is expected to continue to be loss making over the next couple of years, generating -US$286.07M by 2021.

Although it is informative knowing the rate of growth year by year relative to today’s value, it may be more valuable evaluating the rate at which the earnings are moving every year, on average. The advantage of this technique is that we can get a better picture of the direction of Diamond Offshore Drilling’s earnings trajectory over the long run, irrespective of near term fluctuations, fluctuate up and down. To calculate 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 -85.35%. This means, we can assume Diamond Offshore Drilling will chip away at a rate of -85.35% every year for the next few years.

Next Steps:

For Diamond Offshore Drilling, there are three relevant 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 DO 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 DO is currently mispriced by the market.

3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of DO? 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.