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After Tesco PLC’s (LON:TSCO) earnings announcement in February 2018, analyst consensus outlook appear cautiously optimistic, with profits predicted to increase by 29.23% next year against the past 5-year average growth rate of -29.67%. With trailing-twelve-month net income at current levels of UK£990.00m, we should see this rise to UK£1.28b in 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
Check out our latest analysis for Tesco
Can we expect Tesco to keep growing?
The longer term expectations from the 16 analysts of TSCO is tilted towards the positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of TSCO’s earnings growth over these next few years.
By 2021, TSCO’s earnings should reach UK£1.77b, from current levels of UK£990.00m, resulting in an annual growth rate of 15.95%. This leads to an EPS of £0.18 in the final year of projections relative to the current EPS of £0.12. Earnings growth appears to be a result of cost-cutting initiatives, since top-line is predicted to rise at a slower pace than earnings. With a current profit margin of 1.74%, this movement will result in a margin of 2.64% by 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Tesco, there are three key 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 Tesco 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 Tesco 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 Tesco? 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.