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The latest earnings update Deutsche Telekom AG (FRA:DTE) released in December 2018 confirmed that the business experienced a substantial headwind with earnings deteriorating by -37%. Below is a brief commentary on my key takeaways on how market analysts perceive Deutsche Telekom's earnings growth outlook over the next couple of 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' consensus outlook for this coming year seems optimistic, with earnings growing by a significant 93%. This strong growth in earnings is expected to continue, bringing the bottom line up to €5.5b by 2022.
Even though it is useful to understand the growth year by year relative to today’s figure, it may be more valuable to analyze the rate at which the company is rising or falling every year, on average. The benefit of this technique is that we can get a bigger picture of the direction of Deutsche Telekom'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 inserted 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 28%. This means, we can expect Deutsche Telekom will grow its earnings by 28% every year for the next few years.
For Deutsche Telekom, there are three essential 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 DTE 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 DTE is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of DTE? 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.