Sydney Airport Limited’s (ASX:SYD) released its most recent earnings update in December 2017, which signalled that the company benefited from a slight tailwind, eventuating to a single-digit earnings growth of 9.01%. Investors may find it useful to understand how market analysts predict Sydney Airport’s earnings growth trajectory over the next few 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 Sydney Airport

Market analysts’ consensus outlook for the upcoming year seems positive, with earnings increasing by a robust 13.98%. This growth seems to continue into the following year with rates arriving at double digit 26.32% compared to today’s earnings, and finally hitting AU$475.50M by 2021.

Although it is useful to be aware of the rate of growth each year relative to today’s figure, it may be more beneficial to analyze the rate at which the earnings are rising or falling on average every year. The advantage of this approach is that we can get a bigger picture of the direction of Sydney Airport’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I’ve appended 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 7.60%. This means, we can assume Sydney Airport will grow its earnings by 7.60% every year for the next couple of years.

Next Steps:

For Sydney Airport, I’ve put together three pertinent aspects you should further research:

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 SYD 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 SYD is currently mispriced by the market.

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