COFACE SA (EPA:COFA): Set To Experience A Decrease In Earnings?

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Since COFACE SA (EPA:COFA) released its earnings in September 2018, analyst consensus outlook seem bearish, with profits predicted to drop by -8.0% next year. Though this is still an improvement on its past 5-year earnings growth rate of -11%, on average. Presently, with latest-twelve-month earnings at €83m, we should see this fall to €77m by 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for COFACE in the longer term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

Check out our latest analysis for COFACE

How will COFACE perform in the near future?

The longer term view from the 6 analysts covering COFA is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To get an idea of the overall earnings growth trend for COFA, 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.

ENXTPA:COFA Future Profit February 13th 19
ENXTPA:COFA Future Profit February 13th 19

From the current net income level of €83m and the final forecast of €81m by 2022, the annual rate of growth for COFA’s earnings is 1.5%. This leads to an EPS of €0.84 in the final year of projections relative to the current EPS of €0.53. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 5.9% to 5.4% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For COFACE, there are three key 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 COFACE 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 COFACE is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of COFACE? 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.