What Should We Expect From SHW AG’s (FRA:SW1) Earnings Over The Next Few Years?

SHW AG’s (DB:SW1) announced its latest earnings update in December 2017, which indicated that the business experienced a substantial headwind with earnings falling by -20.66%. Today I want to provide a brief commentary on how market analysts predict SHW’s earnings growth trajectory over the next couple of years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings. Check out our latest analysis for SHW

Analysts’ expectations for the upcoming year seems optimistic, with earnings climbing by a significant 69.50%. This strong growth in earnings is expected to continue, bringing the bottom line up to €25.49M by 2021.

DB:SW1 Future Profit Jun 5th 18
DB:SW1 Future Profit Jun 5th 18

While it is useful to understand the growth year by year relative to today’s figure, it may be more beneficial to determine the rate at which the earnings are rising or falling every year, on average. The pro of this method is that we can get a better picture of the direction of SHW’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I’ve appended a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 27.80%. This means, we can expect SHW will grow its earnings by 27.80% every year for the next couple of years.

Next Steps:

For SHW, I’ve put together 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 SW1 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 SW1 is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of SW1? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!