Since Donnelley Financial Solutions, Inc. (NYSE:DFIN) released its earnings in September 2018, it seems that analyst forecasts are fairly pessimistic, with profits predicted to drop by -1.1% next year. However, this is still an improvement on its past 5-year earnings growth rate of -33%, on average. With trailing-twelve-month net income at current levels of US$9.7m, the consensus growth rate suggests that earnings will decline to US$9.6m by 2020. Below is a brief commentary on the longer term outlook the market has for Donnelley Financial Solutions. For those interested in more of an analysis of the company, you can research its fundamentals here.
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What can we expect from Donnelley Financial Solutions in the longer term?
The longer term view from the 5 analysts covering DFIN is one of negative sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To understand the overall trajectory of DFIN’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
This results in an annual growth rate of -7.3% based on the most recent earnings level of US$9.7m to the final forecast of US$11m by 2022. However, if we exclude extraordinary items from earnings, we see that the profits is predicted to rise over time, resulting in an EPS of $1.67 in the final year of forecast compared to the current $0.29 EPS today. The primary reason for earnings contraction is due to a falling top-line, with negative growth of -1.5%. With margins currently sitting at 1.0%, this fall in revenues is expected to cause margin expansion to 1.1% by 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Donnelley Financial Solutions, I’ve put together three relevant aspects you should further examine:
- 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 Donnelley Financial Solutions 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 Donnelley Financial Solutions is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Donnelley Financial Solutions? 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.