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In February 2019, Vidrala, S.A. (BME:VID) announced its latest earnings update, which indicated that the business gained from a robust tailwind, eventuating to a double-digit earnings growth of 30%. Below is my commentary, albeit very simple and high-level, on how market analysts predict Vidrala’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.
Market analysts’ consensus outlook for the upcoming year seems optimistic, with earnings climbing by a robust 12%. This growth seems to continue into the following year with rates reaching double digit 18% compared to today’s earnings, and finally hitting €142m by 2022.
Even though it is informative knowing the growth year by year relative to today’s figure, it may be more insightful estimating the rate at which the company is growing on average every year. The advantage of this method is that we can get a bigger picture of the direction of Vidrala’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’ve inserted a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 7.5%. This means, we can anticipate Vidrala will grow its earnings by 7.5% every year for the next few years.
For Vidrala, there are three fundamental aspects you should look at:
- 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.
- Valuation: What is VID 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 VID is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of VID? 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 email@example.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.