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Vedanta Limited's (NSE:VEDL) latest earnings update in March 2019 confirmed that the company experienced a significant headwind with earnings falling by -32%. Below is a brief commentary on my key takeaways on how market analysts predict Vedanta's earnings growth outlook over the next few 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.
View our latest analysis for Vedanta
Analysts' outlook for next year seems optimistic, with earnings growing by a robust 17%. This growth seems to continue into the following year with rates reaching double digit 39% compared to today’s earnings, and finally hitting ₹97b by 2022.
Even though it’s informative understanding the rate of growth year by year relative to today’s level, it may be more insightful estimating the rate at which the business is rising or falling every year, on average. The pro of this technique is that it ignores near term flucuations and accounts for the overarching direction of Vedanta's earnings trajectory over time, be more volatile. 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 15%. This means, we can assume Vedanta will grow its earnings by 15% every year for the next few years.
Next Steps:
For Vedanta, I've compiled three pertinent factors you should further examine:
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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.
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Valuation: What is VEDL 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 VEDL is currently mispriced by the market.
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Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of VEDL? 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.