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Looking at Sparebanken Øst’s (OB:SPOG) recent earnings update on 31 December 2018, analyst forecasts appear to be bearish, as a -17% fall in profits is expected in the upcoming year compared with the past 5-year average growth rate of 6.2%. Currently with a trailing-twelve-month profit of øre374m, the consensus growth rate suggests that earnings will drop to øre310m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those interested in more of an analysis of the company, you can research its fundamentals here.
How is Sparebanken Øst going to perform in the near future?
The longer term expectations from the 4 analysts of SPOG is tilted towards the negative sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To understand the overall trajectory of SPOG’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.
From the current net income level of øre374m and the final forecast of øre385m by 2022, the annual rate of growth for SPOG’s earnings is -1.9%. However, if we exclude extraordinary items from earnings, we see that the profits is predicted to rise over time, resulting in an EPS of NOK6.13 in the final year of forecast compared to the current NOK6.01 EPS today. The bottom-line decline seems to be caused by cost growth exceeding top-line growth of 3.6% in the next three years. Furthermore, the current 51% margin is expected to contract to 47% by the end of 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Sparebanken Øst, there are three fundamental factors you should further research:
- 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 Sparebanken Øst 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 Sparebanken Øst is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Sparebanken Øst? 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 firstname.lastname@example.org. 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. On rare occasion, data errors may occur. Thank you for reading.