With 19.6% predicted earnings growth over the next year ING Groep NV (NYSE:ING) seems to be a well performing company. What are the important facts you need to know? Today I will look at the latest data and investigate into the future of this high growth stock in more detail. Check out our latest analysis for ING Groep N.V
Can we expect ING to keep growing?
ING is covered by 12 analysts who by consensus are expecting a 32.6% increase in earnings over the next 3 years. This would see the EPS rise to €1.24 levels which would no doubt please investors who are used to average of €0.71 over the past few years.
In the same period we will see the revenue grow from €15.21 Billion to €17.69 Billion in 2019 and profits (net income) are predicted to escalate from €4,435 M to €5,045 M in 2019, roughly growing 1.1x. Margins are expected to be extremely healthy during this time as well.
Is the growth built on solid basis?ING Groep N.V has underperformed the Banks industry, despite the fact that the industry in general has had a pretty bad year.
Whilst ING’s Return on Equity of 8.2% isn’t horrific, it means that the company has underperformed the Banks industry average of 10.38%. This is expected to slightly improve with analysts expecting ROE in 3 years to be 9.1%.
Return on equity (ROE) is a measure of how much profit (net income) a company makes as a percentage of the shareholders equity. Equity is made up of funds from the original issuing of shares and any retained earnings from previous financial years. It varies considerably across sectors, for this reason it is important to asses a stocks ROE relative to its industry. Whilst it is true that the higher the ROE the better the company is performing, ROE does have a weakness. A stock with a disproportionate amount of debt can lead to a small equity base. Thus, a small amount of net income (the numerator) could still produce a high ROE off a modest equity base (the denominator). For this reason investors should always consider the debt situation in conjunction with ROE.
ING Groep N.V is a fast growing company, but as Warren Buffett’s right-hand man Charlie Munger said, “No matter how wonderful a business is, it’s not worth an infinite price“. Is ING overpriced? Or could it be considered an undervalued opportunity? See our latest FREE analysis to find out!
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