The High Beta Trade Is On Right Now

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Severn Trent Plc’s ( LON:SVT ) announced its latest earnings update in March 2018, which signalled that the business experienced a major headwind with earnings declining by -25.2%. Below, I’ve laid out key growth figures on how market analysts perceive Severn Trent’s earnings growth trajectory 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. See our latest analysis for Severn Trent Analysts’ expectations for this coming year seems buoyant, with earnings rising by a robust 27.2%. This growth seems to continue into the following year with rates reaching double digit 31.8% compared to today’s earnings and decreases to UK£278.5m by 2021. LSE:SVT Future Profit September 3rd 18 Although it is informative knowing the growth year by year relative to today’s value, it may be more valuable to evaluate the rate at which the earnings are moving on average every year. The pro of this technique is that it ignores near term flucuations and accounts for the overarching direction of Severn Trent’s earnings trajectory over time, be more volatile. To calculate this rate, I put 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 4.8%. This means, we can anticipate Severn Trent will grow its earnings by 4.8% every year for the next few years. Next Steps: For Severn Trent, I’ve put together three relevant factors you should further research: 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. Valuation : What is SVT 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 SVT is currently mispriced by the market. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of SVT? 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 . View comments
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