Stock Analysis

Telecom Italia SpA (BIT:TIT): Poised For Long Term Success?

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BIT:TIT
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Looking at Telecom Italia SpA's (BIT:TIT) earnings update in June 2018, analysts seem cautiously optimistic, with profits predicted to increase by 42% next year, though this is relatively lower than the historical 5-year average earnings growth of 64%. Currently with trailing-twelve-month earnings of €1.1b, we can expect this to reach €1.5b by 2019. Below is a brief commentary around Telecom Italia's earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

See our latest analysis for Telecom Italia

How will Telecom Italia perform in the near future?

The longer term expectations from the 24 analysts of TIT is tilted towards the positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To get an idea of the overall earnings growth trend for TIT, 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.

BIT:TIT Future Profit November 9th 18
BIT:TIT Future Profit November 9th 18

This results in an annual growth rate of 8.6% based on the most recent earnings level of €1.1b to the final forecast of €1.9b by 2021. This leads to an EPS of €0.082 in the final year of projections relative to the current EPS of €0.053. The primary reason for earnings growth is due to reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. With a current profit margin of 5.7%, this movement will result in a margin of 9.7% by 2021.

Next Steps:

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

About BIT:TIT

Telecom Italia

Telecom Italia S.p.A., together with its subsidiaries, provides fixed and mobile telecommunications services in Italy and internationally.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation5
Future Growth4
Past Performance0
Financial Health0
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Undervalued with reasonable growth potential.