Faes Farma, S.A.’s (BME:FAE) latest earnings update in December 2018 suggested that the company experienced a strong tailwind, eventuating to a double-digit earnings growth of 25%. Below, I’ve laid out key growth figures on how market analysts perceive Faes Farma’s earnings growth trajectory 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.
Market analysts’ prospects for the upcoming year seems buoyant, with earnings increasing by a robust 14%. This growth seems to continue into the following year with rates reaching double digit 28% compared to today’s earnings, and finally hitting €81m by 2022.
Even though it is useful to be aware of the growth each year relative to today’s value, it may be more beneficial to estimate the rate at which the business is moving every year, on average. The advantage of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of Faes Farma’s earnings trajectory over time, which may be more relevant for long term investors. To calculate 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 11%. This means, we can anticipate Faes Farma will grow its earnings by 11% every year for the next few years.
For Faes Farma, there are three important factors you should further examine:
- 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 FAE 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 FAE is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of FAE? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.