freenet AG (FRA:FNTN): Will The Growth Last?

After freenet AG’s (FRA:FNTN) earnings announcement on 30 September 2018, it seems that analyst forecasts are fairly optimistic, with profits predicted to increase by 26% next year relative to the past 5-year average growth rate of 2.5%. With trailing-twelve-month net income at current levels of €287m, we should see this rise to €361m in 2019. Below is a brief commentary on the longer term outlook the market has for freenet. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

View our latest analysis for freenet

Exciting times ahead?

The 13 analysts covering FNTN view its longer term outlook with a positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To get an idea of the overall earnings growth trend for FNTN, 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:FNTN Future Profit December 2nd 18
DB:FNTN Future Profit December 2nd 18

By 2021, FNTN’s earnings should reach €435m, from current levels of €287m, resulting in an annual growth rate of 9.7%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of €2.14 in the final year of forecast compared to the current €2.24 EPS today. Margins are currently sitting at 8.1%, which is expected to expand to 12% by 2021.

Next Steps:

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