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Severfield plc's (LON:SFR) latest earnings update in June 2019 confirmed that the business experienced a robust tailwind, eventuating to a double-digit earnings growth of 11%. Below is my commentary, albeit very simple and high-level, on how market analysts perceive Severfield's earnings growth trajectory over the next few 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.

View our latest analysis for Severfield

Analysts' expectations for the coming year seems rather muted, with earnings growing by a single digit 8.1%. The growth outlook in the following year seems much more optimistic with rates arriving at double digit 13% compared to today’s earnings, and finally hitting UK£24m by 2022.

Although it’s informative knowing the growth each year relative to today’s figure, it may be more beneficial to estimate the rate at which the business is rising or falling on average every year. The benefit of this method is that we can get a bigger picture of the direction of Severfield'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 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 5.2%. This means that, we can presume Severfield will grow its earnings by 5.2% every year for the next couple of years.

Next Steps:

For Severfield, I've compiled three key aspects you should further research:

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 SFR 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 SFR is currently mispriced by the market.

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