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The most recent earnings announcement Halfords Group plc’s (LON:HFD) released in March 2018 confirmed that the business faced a minor headwind with earnings deteriorating from UK£56m to UK£55m, a change of -3.0%. Below is a brief commentary on my key takeaways on how market analysts predict Halfords Group’s earnings growth outlook over the next couple of years and whether the future looks brighter. 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 Halfords Group
Analysts’ expectations for the upcoming year seems rather muted, with earnings expanding by a single digit 7.1%. The growth outlook in the following year seems much more buoyant with rates reaching double digit 14% compared to today’s earnings, and finally hitting UK£63m by 2021.
While it is helpful to understand the growth rate each year relative to today’s value, it may be more beneficial evaluating the rate at which the company is rising or falling every year, on average. The advantage of this technique is that we can get a better picture of the direction of Halfords Group’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 the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 4.9%. This means, we can assume Halfords Group will grow its earnings by 4.9% every year for the next few years.
Next Steps:
For Halfords Group, I’ve compiled three relevant factors 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 HFD 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 HFD 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 HFD? 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.