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adesso AG (FRA:ADN1): Immense Growth Potential?

Simply Wall St

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adesso AG's (FRA:ADN1) most recent earnings update in December 2018 signalled that the company benefited from a robust tailwind, leading to a double-digit earnings growth of 21%. Below is my commentary, albeit very simple and high-level, on how market analysts predict adesso's earnings growth outlook over the next few 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.

View our latest analysis for adesso

Market analysts' consensus outlook for this coming year seems buoyant, with earnings rising by a robust 29%. This growth seems to continue into the following year with rates arriving at double digit 55% compared to today’s earnings, and finally hitting €22m by 2022.

DB:ADN1 Past and Future Earnings, May 8th 2019

While it is helpful to understand the rate of growth year by year relative to today’s value, it may be more valuable to gauge the rate at which the company is moving on average every year. The advantage of this approach is that we can get a better picture of the direction of adesso's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I've appended a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 17%. This means, we can expect adesso will grow its earnings by 17% every year for the next couple of years.

Next Steps:

For adesso, there are three relevant 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 ADN1 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 ADN1 is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ADN1? 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.