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What Do Analysts Think About Arkema S.A.'s (EPA:AKE) Future?

Simply Wall St

In December 2018, Arkema S.A. (EPA:AKE) announced its most recent earnings update, which confirmed that the business gained from a robust tailwind, eventuating to a double-digit earnings growth of 24%. Investors may find it useful to understand how market analysts perceive Arkema's earnings growth trajectory over the next few years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.

See our latest analysis for Arkema

Market analysts' prospects for the coming year seems pessimistic, with earnings decreasing by -8.0%. In the next couple of years, earnings are predicted to continue to be below today's level, with a decrease of -1.7% in 2021, eventually reaching €662m in 2022.

ENXTPA:AKE Past and Future Earnings, April 16th 2019

Even though it’s informative understanding the growth rate year by year relative to today’s level, it may be more insightful to gauge the rate at which the company is rising or falling every year, on average. The advantage of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of Arkema'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 analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 3.2%. This means, we can assume Arkema will grow its earnings by 3.2% every year for the next couple of years.

Next Steps:

For Arkema, there are three relevant aspects you should look at:

  1. 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.
  2. Valuation: What is AKE 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 AKE is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of AKE? 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 editorial-team@simplywallst.com. 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.