What Should We Expect From Faes Farma SA’s (BME:FAE) Earnings Over The Next Year?

Based on Faes Farma SA’s (BME:FAE) earnings update in March 2018, it seems that analyst forecasts are fairly in-line with historical trends, with earnings growth rate expected to be 16.11% in the upcoming year, relative to the past five-year average earnings growth of 17.13% per year. With trailing-twelve-month net income at current levels of €46.52m, we should see this rise to €54.01m in 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

See our latest analysis for Faes Farma

How is Faes Farma going to perform in the near future?

The longer term view from the 4 analysts covering FAE is one of positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To get an idea of the overall earnings growth trend for FAE, 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.
BME:FAE Future Profit July 23rd 18
BME:FAE Future Profit July 23rd 18
From the current net income level of €42.12m and the final forecast of €65.71m by 2021, the annual rate of growth for FAE’s earnings is 13.74%. This leads to an EPS of €0.26 in the final year of projections relative to the current EPS of €0.16. The main reason for growth is a result of cost-cutting initiatives, since top-line is predicted to rise at a slower pace than earnings. Margins is currently sitting at 14.93%, which is expected to expand to 18.28% by 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Faes Farma, I’ve compiled three fundamental aspects 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 Faes Farma 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 Faes Farma is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Faes Farma? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.