After Danone SA’s (EPA:BN) recent earnings announcement in June 2018, analyst consensus outlook seem pessimistic, with earnings expected to decline by -9.5% in the upcoming year against the past 5-year average growth rate of 15%. With trailing-twelve-month net income at current levels of €2.7b, the consensus growth rate suggests that earnings will decline to €2.4b by 2019. Below is a brief commentary on the longer term outlook the market has for Danone. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
What can we expect from Danone in the longer term?
The 27 analysts covering BN view its longer term outlook with a positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To get an idea of the overall earnings growth trend for BN, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
This results in an annual growth rate of 8.3% based on the most recent earnings level of €2.5b to the final forecast of €2.7b by 2021. This leads to an EPS of €4.57 in the final year of projections relative to the current EPS of €3.92. Earnings growth appears to be a result of cost-cutting initiatives, since top-line is predicted to rise at a slower pace than earnings. With a current profit margin of 9.9%, this movement will result in a margin of 10% by 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For Danone, I’ve compiled three pertinent aspects you should look at:
- 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 Danone 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 Danone is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Danone? 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 email@example.com.