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ITC Limited's (NSE:ITC) latest earnings update in March 2019 confirmed that the business benefited from a robust tailwind, leading to a double-digit earnings growth of 12%. Below is a brief commentary on my key takeaways on how market analysts predict 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
Analysts' outlook for next year seems rather muted, with earnings increasing by a single digit 9.5%. The growth outlook in the following year seems much more optimistic with rates arriving at double digit 23% compared to today’s earnings, and finally hitting ₹179b by 2022.
Although it’s informative knowing the growth each year relative to today’s level, it may be more valuable to evaluate the rate at which the earnings are growing 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 appended 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 11%. This means that, we can assume ITC will grow its earnings by 11% every year for the next couple of years.
Next Steps:
For ITC, I've put together three pertinent 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 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.
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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!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.