In March 2018, Associated British Foods plc (LON:ABF) announced its earnings update. Overall, analyst consensus outlook appear cautiously subdued, as a 2.98% rise in profits is expected in the upcoming year, against the higher past 5-year average growth rate of 12.48%. By 2019, we can expect Associated British Foods’s bottom line to reach UK£1.07b, a jump from the current trailing-twelve-month UK£1.04b. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Associated British Foods in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
How will Associated British Foods perform in the near future?
The 19 analysts covering ABF 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 reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
By 2021, ABF’s earnings should reach UK£1.52b, from current levels of UK£1.20b, resulting in an annual growth rate of 9.88%. This leads to an EPS of £1.69 in the final year of projections relative to the current EPS of £1.52. The bottom-line growth seems to be caused by cost cutting activities, as revenues is expected to grow much slower than earnings. With a current profit margin of 7.80%, this movement will result in a margin of 8.53% by 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For Associated British Foods, I’ve put together three pertinent 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 Associated British Foods 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 Associated British Foods is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Associated British Foods? 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 firstname.lastname@example.org.