The Southern Company’s (NYSE:SO) latest earnings announcement in September 2017 indicated that the company experienced a slight tailwind, leading to a single-digit earnings growth of 3.42%. Below is a brief commentary on my key takeaways on how market analysts perceive Southern’s earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. 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 Southern

Analysts’ expectations for the coming year seems buoyant, with earnings growth more than doubling. Earnings continue to grow strongly in the next couple of years, finally arriving at $3,350.2M in 2021.

Although it’s helpful to be aware of the growth rate each year relative to today’s value, it may be more insightful estimating the rate at which the earnings are rising or falling every year, on average. The advantage of this technique is that we can get a bigger picture of the direction of Southern’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’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 45.36%. This means that, we can expect Southern will grow its earnings by 45.36% every year for the next few years.

Next Steps:

For Southern, there are three pertinent aspects you should further examine:

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 SO 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 SO is currently mispriced by the market.

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