GEA Group Aktiengesellschaft (FRA:G1A): Poised For Long Term Success?

In June 2018, GEA Group Aktiengesellschaft (FRA:G1A) released its earnings update. Generally, analyst consensus outlook appear vastly optimistic, with earnings expected to grow by a high double-digit of 50.20% in the upcoming year, against the historical 5-year average growth rate of -1.04%. With trailing-twelve-month net income at current levels of €197.00m, we should see this rise to €295.90m in 2019. Below is a brief commentary around GEA Group’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

View our latest analysis for GEA Group

How is GEA Group going to perform in the near future?

The longer term view from the 25 analysts covering G1A is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of G1A’s earnings growth over these next few years.
DB:G1A Future Profit August 13th 18
DB:G1A Future Profit August 13th 18
From the current net income level of €228.03m and the final forecast of €454.22m by 2021, the annual rate of growth for G1A’s earnings is 17.23%. This leads to an EPS of €2.13 in the final year of projections relative to the current EPS of €1.22. The primary reason for earnings growth is due to cost cutting activities, as revenues is expected to grow much slower than earnings. With a current profit margin of 4.95%, this movement will result in a margin of 8.93% by 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For GEA Group, I’ve put together three fundamental 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 GEA Group 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 GEA Group is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of GEA Group? 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.