Meliá Hotels International SA. (BME:MEL): Is It A Good Long Term Opportunity?

The latest earnings update Meliá Hotels International SA.’s (BME:MEL) released in December 2017 revealed that the business experienced a robust tailwind, eventuating to a double-digit earnings growth of 27.84%. Investors may find it useful to understand how market analysts predict Meliá Hotels International’s earnings growth outlook over the next few 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 Meliá Hotels International

Market analysts’ consensus outlook for the coming year seems buoyant, with earnings increasing by a robust 12.35%. This growth seems to continue into the following year with rates reaching double digit 20.14% compared to today’s earnings, and finally hitting €166.36M by 2021.

BME:MEL Future Profit May 10th 18
BME:MEL Future Profit May 10th 18

While it’s informative understanding the rate of growth year by year relative to today’s figure, it may be more insightful to analyze the rate at which the company is growing on average every year. The advantage of this technique is that we can get a bigger picture of the direction of Meliá Hotels International’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 inserted 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 7.48%. This means, we can presume Meliá Hotels International will grow its earnings by 7.48% every year for the next couple of years.

Next Steps:

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