On 30 September 2018, Continental Aktiengesellschaft (FRA:CON) announced its latest earnings update. Overall, analyst forecasts seem pessimistic, with earnings expected to decline by -2.1% in the upcoming year relative to the past 5-year average growth rate of 8.4%. With trailing-twelve-month net income at current levels of €3.0b, the consensus growth rate suggests that earnings will decline to €2.9b by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
Can we expect Continental to keep growing?
The view from 26 analysts over the next three years is one of positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To get an idea of the overall earnings growth trend for CON, 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, CON’s earnings should reach €3.5b, from current levels of €3.0b, resulting in an annual growth rate of 8.2%. EPS reaches €20.39 in the final year of forecast compared to the current €14.92 EPS today. Earnings growth appears to be a result of reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. In 2021, CON’s profit margin will have expanded from 6.8% to 7.0%.
Future outlook is only one aspect when you’re building an investment case for a stock. For Continental, there are three relevant aspects 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 Continental 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 Continental is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Continental? 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 email@example.com.