What Are Analysts Saying About Subsea 7 SA’s (OB:SUBC) Future?

Based on Subsea 7 SA’s (OB:SUBC) earnings update in June 2018, analyst forecasts seem pessimistic, as a -15.1% fall in profits is expected in the upcoming year. However, this outlook is not unfounded, given the 5-year track record of negative growth of -15.9%. Presently, with latest-twelve-month earnings at US$238.0m, we should see this fall to US$202.0m by 2019. Below is a brief commentary on the longer term outlook the market has for Subsea 7. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

Check out our latest analysis for Subsea 7

How is Subsea 7 going to perform in the near future?

Longer term expectations from the 21 analysts covering SUBC’s stock is one of positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To understand the overall trajectory of SUBC’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.

By 2021, SUBC’s earnings should reach US$602.7m, from current levels of US$454.8m, resulting in an annual growth rate of 13.7%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of $0.96 in the final year of forecast compared to the current $1.4 EPS today. The main reason for growth is a result of cost cutting activities, as revenues is expected to grow much slower than earnings. With a current profit margin of 11.4%, this movement will result in a margin of 14.1% by 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Subsea 7, there are three essential factors 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 Subsea 7 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 Subsea 7 is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Subsea 7? 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.