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The latest earnings update Berger Paints India Limited (NSE:BERGEPAINT) released in May 2019 indicated that the company benefited from a small tailwind, eventuating to a single-digit earnings growth of 8.0%. Below is my commentary, albeit very simple and high-level, on how market analysts view Berger Paints India's earnings growth outlook over the next couple of 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.

See our latest analysis for Berger Paints India

Analysts' expectations for the coming year seems buoyant, with earnings expanding by a robust 27%. This growth seems to continue into the following year with rates reaching double digit 52% compared to today’s earnings, and finally hitting ₹9.0b by 2022.

Although it’s informative understanding the growth rate year by year relative to today’s level, it may be more insightful to estimate the rate at which the business is rising or falling on average every year. The benefit of this technique is that we can get a bigger picture of the direction of Berger Paints India'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 19%. This means, we can assume Berger Paints India will grow its earnings by 19% every year for the next few years.

Next Steps:

For Berger Paints India, there are three important 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 BERGEPAINT 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 BERGEPAINT is currently mispriced by the market.

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