The most recent earnings update Capgemini SE’s (ENXTPA:CAP) released in December 2017 confirmed that the business experienced a substantial headwind with earnings declining by -10.97%. Below is a brief commentary on my key takeaways on how market analysts perceive Capgemini’s earnings growth outlook over the next couple of years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in. View our latest analysis for Capgemini
Market analysts’ consensus outlook for next year seems rather muted, with earnings climbing by a single digit 4.45%. The growth outlook in the following year seems much more positive with rates reaching double digit 18.64% compared to today’s earnings, and finally hitting €1.06B by 2021.
Although it’s useful to be aware of the growth each year relative to today’s level, it may be more valuable determining the rate at which the company is growing every year, on average. The benefit of this approach is that we can get a bigger picture of the direction of Capgemini’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 9.22%. This means, we can expect Capgemini will grow its earnings by 9.22% every year for the next couple of years.
For Capgemini, I’ve put together three important 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 CAP 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 CAP is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CAP? 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 pass 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.