ITC Limited’s (NSE:ITC) most recent earnings update in March 2018 revealed that the business gained from a slight tailwind, leading to a single-digit earnings growth of 9.5%. Below is a brief commentary on my key takeaways on how market analysts perceive ITC’s earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. 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 ITC

Market analysts’ consensus outlook for this coming year seems optimistic, with earnings rising by a robust 10.7%. This growth seems to continue into the following year with rates arriving at double digit 25.2% compared to today’s earnings, and finally hitting ₹155.01b by 2021.

Even though it’s helpful to understand the growth rate each year relative to today’s value, it may be more insightful to gauge the rate at which the earnings are moving on average every year. The pro of this technique is that we can get a better picture of the direction of ITC’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 10.7%. This means, we can expect ITC will grow its earnings by 10.7% every year for the next couple of years.

Next Steps:

For ITC, I’ve compiled three pertinent factors 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 ITC 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 ITC is currently mispriced by the market.

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