What Should Investors Know About HELLA GmbH & Co KGaA’s (FRA:HLE) Growth?

After HELLA GmbH & Co KGaA’s (FRA:HLE) earnings announcement in August 2018, it seems that analyst forecasts are fairly optimistic, as a 32% increase in profits is expected in the upcoming year, compared with the past 5-year average growth rate of 13%. Currently with trailing-twelve-month earnings of €402m, we can expect this to reach €529m by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

Check out our latest analysis for HELLA GmbH KGaA

What can we expect from HELLA GmbH KGaA in the longer term?

The longer term expectations from the 20 analysts of HLE 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 get an idea of the overall earnings growth trend for HLE, 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.

DB:HLE Future Profit November 12th 18
DB:HLE Future Profit November 12th 18

From the current net income level of €389m and the final forecast of €456m by 2021, the annual rate of growth for HLE’s earnings is -6.3%. However, if we exclude extraordinary items from earnings, we see that the profits is predicted to rise over time, resulting in an EPS of €4.24 in the final year of forecast compared to the current €3.5 EPS today. The primary reason for earnings contraction is due to top-line expansion of 5.2%, which is predicted to lag cost growth leading up to 2021. But by the end of 2021, analysts are expecting slower cost growth, resulting in a margin expansion, from the recent 5.5% to 5.8%.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For HELLA GmbH KGaA, I’ve compiled three important factors you should further examine:

  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 HELLA GmbH KGaA 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 HELLA GmbH KGaA is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of HELLA GmbH KGaA? 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.