CPH Chemie + Papier Holding AG (VTX:CPHN): Set To Experience A Decrease In Earnings?

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Looking at CPH Chemie + Papier Holding AG’s (VTX:CPHN) earnings update in December 2018, it seems that analyst forecasts are fairly bearish, as a 4.7% fall in profits is expected in the upcoming year compared with the past 5-year average growth rate of 84%. Currently with a trailing-twelve-month profit of CHF42m, the consensus growth rate suggests that earnings will drop to CHF40m by 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for CPH Chemie + Papier Holding in the longer term. For those interested in more of an analysis of the company, you can research its fundamentals here.

See our latest analysis for CPH Chemie + Papier Holding

Can we expect CPH Chemie + Papier Holding to keep growing?

The longer term expectations from the 3 analysts of CPHN is tilted towards the negative sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.

SWX:CPHN Past and Future Earnings, July 16th 2019
SWX:CPHN Past and Future Earnings, July 16th 2019

This results in an annual growth rate of -2.1% based on the most recent earnings level of CHF42m to the final forecast of CHF40m by 2022. EPS reaches CHF6.73 in the final year of forecast compared to the current CHF7.05 EPS today. The primary reason for earnings contraction is due to cost growth exceeding top-line growth of 2.5% in the next three years. With this high cost growth, margins is expected to contract from 7.9% to 6.9% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For CPH Chemie + Papier Holding, there are three essential 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 CPH Chemie + Papier Holding 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 CPH Chemie + Papier Holding is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of CPH Chemie + Papier Holding? 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.