Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

In December 2018, Bakkavor Group plc (LON:BAKK) announced its latest earnings update, which showed that the business benefited from a major tailwind, more than doubling its earnings from the prior year. Investors may find it useful to understand how market analysts view Bakkavor Group's earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.

Check out our latest analysis for Bakkavor Group

Market analysts' consensus outlook for the upcoming year seems rather muted, with earnings climbing by a single digit 4.5%. The growth outlook in the following year seems much more optimistic with rates generating double digit 25% compared to today’s earnings, and finally hitting UK£88m by 2022.

While it is helpful to understand the growth rate year by year relative to today’s level, it may be more insightful determining the rate at which the business is growing on average every year. The pro of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of Bakkavor Group's earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I've inserted a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 8.4%. This means, we can assume Bakkavor Group will grow its earnings by 8.4% every year for the next few years.

Next Steps:

For Bakkavor Group, I've compiled three relevant 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 BAKK 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 BAKK is currently mispriced by the market.

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