What Should You Know About Red Eléctrica Corporación SA's (BME:REE) Future?

In March 2018, Red Eléctrica Corporación SA (BME:REE) released its earnings update. Generally, the consensus outlook from analysts appear somewhat bearish, as a 5.26% rise in profits is expected in the upcoming year, compared with the higher past 5-year average growth rate of 6.49%. Currently with trailing-twelve-month earnings of €677.13m, we can expect this to reach €712.73m by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. For those interested in more of an analysis of the company, you can research its fundamentals here.

View our latest analysis for Red Eléctrica Corporación

How will Red Eléctrica Corporación perform in the near future?

Longer term expectations from the 18 analysts covering REE’s stock is one of negative sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To understand the overall trajectory of REE's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

From the current net income level of €669.84m and the final forecast of €675.13m by 2021, the annual rate of growth for REE’s earnings is -1.64%. However, if we exclude extraordinary items from earnings, we see that the profits is predicted to rise over time, resulting in an EPS of €1.27 in the final year of forecast compared to the current €1.24 EPS today. Contraction in the bottom line seems to suggest revenue declining at an average annual rate of -0.36%. With margins currently sitting at 33.36%, this fall in revenues is expected to cause margin expansion to 34.55% by 2021.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Red Eléctrica Corporación, there are three key aspects you should look at:

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 Red Eléctrica Corporación 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 Red Eléctrica Corporación is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Red Eléctrica Corporación? 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 past 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.

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.