Applus Services, S.A. (BME:APPS): What Can We Expect From This High Growth Stock?

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In February 2019, Applus Services, S.A. (BME:APPS) released its most recent earnings announcement, which revealed that the business gained from a strong tailwind, leading to a double-digit earnings growth of 16%. Investors may find it useful to understand how market analysts predict Applus Services’s earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.

Check out our latest analysis for Applus Services

Market analysts’ consensus outlook for the coming year seems optimistic, with earnings rising by a significant 51%. This high growth in earnings is expected to continue, bringing the bottom line up to €82m by 2022.

BME:APPS Past and Future Earnings, July 21st 2019
BME:APPS Past and Future Earnings, July 21st 2019

Although it is helpful to understand the rate of growth year by year relative to today’s value, it may be more valuable evaluating the rate at which the business is growing on average every year. The advantage of this technique is that we can get a better picture of the direction of Applus Services’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I put 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 19%. This means that, we can assume Applus Services will grow its earnings by 19% every year for the next couple of years.

Next Steps:

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.