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London Stock Exchange Group plc (LON:LSE): Is It A Smart Long Term Opportunity?

Simply Wall St

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After London Stock Exchange Group plc's (LON:LSE) earnings announcement in December 2018, analyst forecasts seem fairly subdued, with earnings expected to grow by 15% in the upcoming year against the higher past 5-year average growth rate of 27%. Currently with trailing-twelve-month earnings of UK£480m, we can expect this to reach UK£553m by 2020. Below is a brief commentary around London Stock Exchange Group's earnings outlook going forward, which may give you a sense of market sentiment for the company. For those interested in more of an analysis of the company, you can research its fundamentals here.

View our latest analysis for London Stock Exchange Group

Can we expect London Stock Exchange Group to keep growing?

Over the next three years, it seems the consensus view of the 12 analysts covering LSE is skewed towards the positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To get an idea of the overall earnings growth trend for LSE, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

LSE:LSE Past and Future Earnings, July 9th 2019

By 2022, LSE's earnings should reach UK£728m, from current levels of UK£480m, resulting in an annual growth rate of 14%. This leads to an EPS of £2.1 in the final year of projections relative to the current EPS of £1.38. Margins are currently sitting at 16%, which is expected to expand to 28% by 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For London Stock Exchange Group, I've compiled three key factors 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 London Stock Exchange Group 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 London Stock Exchange Group is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of London Stock Exchange Group? 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.