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The latest earnings update Continental Aktiengesellschaft (FRA:CON) released in December 2018 showed that the company experienced a minor headwind with earnings falling from €3.0b to €2.9b, a change of -2.9%. Below is a brief commentary on my key takeaways on how market analysts perceive Continental's earnings growth trajectory 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.
Analysts' outlook for the coming year seems pessimistic, with earnings declining by a double-digit -11%. However, the next few years show a contrast, with earnings growth becoming positive in 2021, with the bottom line increasing to €3.2b in 2022.
Even though it’s useful to be aware of the growth each year relative to today’s figure, it may be more valuable to analyze the rate at which the company is growing on average every year. The advantage of this approach is that we can get a better picture of the direction of Continental's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I've appended 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 3.8%. This means, we can assume Continental will grow its earnings by 3.8% every year for the next couple of years.
For Continental, I've put together three key aspects 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 CON 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 CON is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CON? 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.