In June 2018, Arkema SA (EPA:AKE) released its earnings update. Generally, analyst forecasts seem pessimistic, as a -0.4% fall in profits is expected in the upcoming year compared with the past 5-year average growth rate of 27%. With trailing-twelve-month net income at current levels of €653m, the consensus growth rate suggests that earnings will decline to €650m by 2019. Below is a brief commentary around Arkema’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
How is Arkema going to perform in the near future?
The longer term view from the 16 analysts covering AKE is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To get an idea of the overall earnings growth trend for AKE, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
By 2021, AKE’s earnings should reach €656m, from current levels of €543m, resulting in an annual growth rate of 8.3%. This leads to an EPS of €10.36 in the final year of projections relative to the current EPS of €7.17. The bottom-line growth seems to be caused by cost cutting activities, as revenues is expected to grow much slower than earnings. In 2021, AKE’s profit margin will have expanded from 6.5% to 7.0%.
Future outlook is only one aspect when you’re building an investment case for a stock. For Arkema, I’ve compiled 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 Arkema 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 Arkema is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Arkema? 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 past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.