What Should Investors Know About Capgemini SE’s (EPA:CAP) Future?

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On 31 December 2018, Capgemini SE (EPA:CAP) announced its earnings update. Overall, it seems that analyst forecasts are fairly optimistic, with earnings expected to grow by 28% in the upcoming year relative to the past 5-year average growth rate of 8.3%. By 2020, we can expect Capgemini’s bottom line to reach €931m, a jump from the current trailing-twelve-month of €730m. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Capgemini in the longer term. For those interested in more of an analysis of the company, you can research its fundamentals here.

Check out our latest analysis for Capgemini

How is Capgemini going to perform in the near future?

The longer term view from the 17 analysts covering CAP is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To understand the overall trajectory of CAP’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.

ENXTPA:CAP Past and Future Earnings, February 23rd 2019
ENXTPA:CAP Past and Future Earnings, February 23rd 2019

This results in an annual growth rate of 15% based on the most recent earnings level of €730m to the final forecast of €1.2b by 2022. EPS reaches €6.96 in the final year of forecast compared to the current €4.37 EPS today. In 2022, CAP’s profit margin will have expanded from 5.5% to 7.4%.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Capgemini, I’ve put together three important aspects you should further research:

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