Neste Oyj (HEL:NESTE): Immense Growth Potential?

The most recent earnings update Neste Oyj’s (HEL:NESTE) released in December 2018 showed that the company experienced a significant headwind with earnings declining by -15%. Below is my commentary, albeit very simple and high-level, on how market analysts view Neste Oyj’s earnings growth outlook over the next few years and whether the future looks brighter. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.

See our latest analysis for Neste Oyj

Analysts’ outlook for this coming year seems buoyant, with earnings increasing by a significant 77%. This level of earnings is expected to be maintained over the next couple of years, plateauing at €1.5b by 2022.

HLSE:NESTE Past and Future Earnings, April 7th 2019
HLSE:NESTE Past and Future Earnings, April 7th 2019

Although it’s informative knowing the growth rate year by year relative to today’s figure, it may be more insightful to determine the rate at which the company is moving on average every year. The benefit of this approach is that we can get a better picture of the direction of Neste Oyj’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 put 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 13%. This means, we can expect Neste Oyj will grow its earnings by 13% every year for the next few years.

Next Steps:

For Neste Oyj, I’ve compiled three fundamental factors 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 NESTE 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 NESTE is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of NESTE? 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 editorial-team@simplywallst.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.