What Should We Expect From Commonwealth Bank of Australia’s (ASX:CBA) Earnings Over The Next Few Years?
In This Article:
Commonwealth Bank of Australia’s (ASX:CBA) most recent earnings update in June 2018 revealed that the company experienced a minor headwind with earnings deteriorating from AU$9.77b to AU$9.38b, a change of -4.00%. Below, I’ve laid out key numbers on how market analysts perceive Commonwealth Bank of Australia’s earnings growth outlook over the next couple of years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
View our latest analysis for Commonwealth Bank of Australia
Market analysts’ consensus outlook for the coming year seems rather muted, with earnings climbing by a single digit 9.33%. The growth outlook in the following year seems much more positive with rates reaching double digit 12.34% compared to today’s earnings, and finally hitting AU$10.89b by 2021.
Although it is useful to understand the growth rate year by year relative to today’s figure, it may be more insightful estimating the rate at which the business is rising or falling every year, on average. The pro of this method is that we can get a better picture of the direction of Commonwealth Bank of Australia’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’ve appended 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 4.79%. This means, we can expect Commonwealth Bank of Australia will grow its earnings by 4.79% every year for the next few years.
Next Steps:
For Commonwealth Bank of Australia, I’ve compiled three essential aspects you should further research:
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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 CBA 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 CBA 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 CBA? 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.