Australia and New Zealand Banking Group Limited (ASX:ANZ): Immense Growth Potential?

The most recent earnings release Australia and New Zealand Banking Group Limited’s (ASX:ANZ) announced in September 2018 confirmed that the business gained from a robust tailwind, eventuating to a double-digit earnings growth of 11%. Below is a brief commentary on my key takeaways on how market analysts predict Australia and New Zealand Banking Group’s earnings growth trajectory 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.

See our latest analysis for Australia and New Zealand Banking Group

Market analysts’ consensus outlook for next year seems pessimistic, with earnings decreasing by -3.3%. But in the following year, there is a complete contrast in performance, with reaching double digit 0.5% compared to today’s level and continues to increase to AU$7.2b in 2021.

ASX:ANZ Future Profit November 5th 18

While it is useful to be aware of the growth year by year relative to today’s figure, it may be more valuable analyzing the rate at which the business is growing every year, on average. The benefit of this method is that it ignores near term flucuations and accounts for the overarching direction of Australia and New Zealand Banking Group’s earnings trajectory over time, which may be more relevant for long term investors. To compute 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 1.3%. This means, we can assume Australia and New Zealand Banking Group will grow its earnings by 1.3% every year for the next few years.

Next Steps:

For Australia and New Zealand Banking Group, there are three pertinent aspects 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 ANZ 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 ANZ is currently mispriced by the market.

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