On 30 September 2018, Westpac Banking Corporation (ASX:WBC) announced its earnings update. Overall,
it seems that analyst forecasts are fairly optimistic,
with earnings expected to grow by 4.7% in the upcoming year
the past 5-year average growth rate of 2.9%.
With trailing-twelve-month net income at current levels of AU$8.1b, we should see this rise to AU$8.5b in 2019.
Below is a brief commentary on the longer term outlook the market has for Westpac Banking.
Readers that are interested in understanding the company beyond these figures should
research its fundamentals here.
Exciting times ahead?
The 14 analysts covering WBC view its longer term outlook with a
Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point.
I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of WBC’s earnings growth over these next few years.
This results in an annual growth rate of 4.0% based on the most recent earnings level of AU$8.1b to the final forecast of AU$9.1b by 2021.
EPS reaches A$2.64 in the final year of forecast compared to the current
A$2.38 EPS today.
The bottom-line growth seems to be caused by
reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate.
In 2021, WBC’s profit margin will have expanded from 38% to 38%.
Future outlook is only one aspect when you’re building an investment case for a stock. For Westpac Banking,
- 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 Westpac Banking 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 Westpac Banking is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Westpac Banking? 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 email@example.com.