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As Ferrari N.V. (NYSE:RACE) released its latest earnings announcement on 31 March 2019, analyst forecasts seem bearish, as a 9.6% fall in profits is expected in the upcoming year relative to the past 5-year average growth rate of 28%. With trailing-twelve-month net income at current levels of €785m, the consensus growth rate suggests that earnings will decline to €710m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
How will Ferrari perform in the near future?
The longer term expectations from the 19 analysts of RACE is tilted towards the positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of RACE's earnings growth over these next few years.
From the current net income level of €785m and the final forecast of €809m by 2022, the annual rate of growth for RACE’s earnings is 5.6%. This leads to an EPS of €4.47 in the final year of projections relative to the current EPS of €4.16. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 23% to 19% by the end of 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For Ferrari, there are three fundamental factors 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 Ferrari 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 Ferrari is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Ferrari? 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 firstname.lastname@example.org. 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.