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Coca-Cola Amatil Limited (ASX:CCL): Are Analysts’ Forecast Signalling Trouble Ahead?

Simply Wall St

After Coca-Cola Amatil Limited's (ASX:CCL) earnings announcement on 28 June 2019, analyst consensus outlook seem bearish, as a 4.4% fall in profits is expected in the upcoming year against the past 5-year average growth rate of 14%. Currently with a trailing-twelve-month profit of AU$402m, the consensus growth rate suggests that earnings will drop to AU$384m by 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Coca-Cola Amatil in the longer term. For those interested in more of an analysis of the company, you can research its fundamentals here.

Check out our latest analysis for Coca-Cola Amatil

What can we expect from Coca-Cola Amatil in the longer term?

The view from 11 analysts over the next three years 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 reduce the year-on-year volatility of analyst earnings forecast, I've inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.

ASX:CCL Past and Future Earnings, August 22nd 2019

From the current net income level of AU$402m and the final forecast of AU$422m by 2022, the annual rate of growth for CCL’s earnings is 4.3%. This leads to an EPS of A$0.57 in the final year of projections relative to the current EPS of A$0.55. However, the near term margins may change heading into 2022, from the current levels of 8.4% to 8.1%.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Coca-Cola Amatil, there are three essential factors you should further research:

  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 Coca-Cola Amatil 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 Coca-Cola Amatil is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Coca-Cola Amatil? 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.