Scandinavian Tobacco Group A/S (CPH:STG): Set To Experience A Decrease In Earnings?

Looking at Scandinavian Tobacco Group A/S’s (CPH:STG) earnings update in March 2018, it seems that analyst forecasts are fairly bearish, with earnings expected to decline by -5.46% in the upcoming year compared with the past 5-year average growth rate of 2.32%. With net income at current levels of ø711.60m, the consensus growth rate suggests that earnings will decline to ø672.72m by 2019. Below is a brief commentary around Scandinavian Tobacco Group’s earnings outlook going forward, which may give you a sense of market sentiment for the company. For those interested in more of an analysis of the company, you can research its fundamentals here. View out our latest analysis for Scandinavian Tobacco Group

Can we expect Scandinavian Tobacco Group to keep growing?

The view from 4 analysts over the next three years 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. To get an idea of the overall earnings growth trend for STG, 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.
CPSE:STG Future Profit July 10th 18
CPSE:STG Future Profit July 10th 18
By 2021, STG’s earnings should reach ø769.36m, from current levels of ø711.60m, resulting in an annual growth rate of 5.27%. This leads to an EPS of DKK7.85 in the final year of projections relative to the current EPS of DKK7.14. Growth in the bottom line seems to suggest reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. However, the expansion of the current 11.01% margin is not expected to be sustained, as it begins to contract to 10.93% by the end of 2021.

Next Steps:

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