As analysts forecast Getlink SE (ENXTPA:GET) to register solid earnings growth of 25.41% in the coming year, let’s stop and think through this encouraging sentiment. Investors should consider the forces that are driving this projected increase, as the return realised by shareholders may look different in the future if underlying assumptions are not realised. To help investors get a top level understanding, this article will interpret Getlink’s margin performance so investors can evaluate the revenue and cost drivers behind future earnings projections and understand how they may impact on returns compared to the industry.View out our latest analysis for Getlink
Breaking Down GET’s Profit Margin
At a high level, a company’s ability to earn on their sales efforts can play an important role in determining shareholder value. By calculating GET’s profit margin, we can take a closer look at this ability and use it to understand what is driving earnings growth.
Margin Calculation for GET
Profit Margin = Net Income ÷ Revenue
∴ Profit Margin = €107.82m ÷ €1.03b = 10.44%
The past five years have seen Getlink’s margin expand, due to average net income growth of 29.52% exceeding 2.30% in average revenue growth, which suggests that the company has been able to convert a larger percentage of revenue into net income whilst grow their top line at the same time. GET’s most recent margin of 10.44% appears to follow this trend, indicating that earnings growth has likely been driven through improved cost management alongside the benefits of revenue growth.
Using Getlink’s margin expectations as a way to understand projections for the future
Forward looking projections suggest margins will further the previous expansion, with annual revenue growth tipped at 5.14% and a forecasted 24.09% in annual net income growth. This suggests future earnings growth is driven further by enhanced cost efficiency alongside revenue increases, which is enlarging the incremental amount of net income that is retained from the forecasted revenue growth. Nonetheless, those interested in the company should remember that a expanding margin can mean different things for different companies, thus more detailed research is essential.
For GET, there are three relevant aspects you should further examine:
- 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.
- Valuation: What is GET 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 GET is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of GET? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!