Safran SA's (EPA:SAF) most recent earnings update in April 2019 signalled that the business experienced a significant headwind with earnings deteriorating by -66%. Below, I've laid out key growth figures on how market analysts view Safran's earnings growth trajectory over the next few years and whether the future looks brighter. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Market analysts' prospects for next year seems optimistic, with earnings increasing by a significant 80%. This strong growth in earnings is expected to continue, bringing the bottom line up to €3.0b by 2022.
Even though it is helpful to understand the growth each year relative to today’s figure, it may be more valuable to estimate the rate at which the earnings are rising or falling every year, on average. The pro of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of Safran's earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I put 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 18%. This means, we can assume Safran will grow its earnings by 18% every year for the next couple of years.
For Safran, there are 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 SAF 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 SAF is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of SAF? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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