In September 2018, Koninklijke DSM N.V. (AMS:DSM) released its earnings update. Generally, analyst consensus outlook appear bearish, with earnings expected to decline by -13% in the upcoming year relative to the past 5-year average growth rate of 54%. With trailing-twelve-month net income at current levels of €1.8b, the consensus growth rate suggests that earnings will decline to €1.5b by 2020. Below is a brief commentary on the longer term outlook the market has for Koninklijke DSM. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
Exciting times ahead?
Longer term expectations from the 23 analysts covering DSM’s stock is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of DSM’s earnings growth over these next few years.
From the current net income level of €1.8b and the final forecast of €1.8b by 2022, the annual rate of growth for DSM’s earnings is 0.4%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of €6.03 in the final year of forecast compared to the current €10.07 EPS today. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 20% to 19% by the end of 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Koninklijke DSM, I’ve put together three relevant factors 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 Koninklijke DSM 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 Koninklijke DSM is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Koninklijke DSM? 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 firstname.lastname@example.org.