Stalprodukt S.A. (WSE:STP): Should The Future Outlook Worry You?

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The latest earnings release Stalprodukt S.A.’s (WSE:STP) announced in December 2018 revealed that the business experienced a slight tailwind, leading to a single-digit earnings growth of 8.0%. Below is my commentary, albeit very simple and high-level, on how market analysts predict Stalprodukt’s earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.

See our latest analysis for Stalprodukt

Market analysts’ prospects for the coming year seems rather muted, with earnings climbing by a single digit 9.6%. However, the following year seems to show a contrast, with earnings declining by -16%. This volatility continues into the final year of forecast, with earnings reaching zł219m.

WSE:STP Past and Future Earnings, May 1st 2019
WSE:STP Past and Future Earnings, May 1st 2019

Even though it’s helpful to be aware of the growth rate year by year relative to today’s level, it may be more insightful gauging the rate at which the earnings are moving on average every year. The benefit of this approach is that it ignores near term flucuations and accounts for the overarching direction of Stalprodukt’s earnings trajectory over time, be more volatile. To calculate this rate, I’ve inserted a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is -12%. This means that, we can expect Stalprodukt will chip away at a rate of -12% every year for the next few years.

Next Steps:

For Stalprodukt, I’ve put together three pertinent aspects 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 STP 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 STP is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of STP? 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 editorial-team@simplywallst.com. 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. Thank you for reading.