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The latest earnings update NEUCA SA (WSE:NEU) released in December 2018 confirmed that the business benefited from a small tailwind, leading to a single-digit earnings growth of 4.0%. Investors may find it useful to understand how market analysts perceive NEUCA's earnings growth outlook over the next few years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Analysts' expectations for next year seems optimistic, with earnings climbing by a robust 14%. This growth seems to continue into the following year with rates reaching double digit 23% compared to today’s earnings, and finally hitting zł126m by 2022.
Although it is useful to be aware of the growth rate each year relative to today’s level, it may be more valuable gauging the rate at which the earnings are rising or falling every year, on average. The benefit of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of NEUCA'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 8.8%. This means, we can assume NEUCA will grow its earnings by 8.8% every year for the next couple of years.
For NEUCA, 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 NEU 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 NEU is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of NEU? 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 email@example.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.