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Will ElringKlinger AG’s (FRA:ZIL2) Earnings Grow In The Next 12 Months?

In June 2018, ElringKlinger AG (FRA:ZIL2) announced its earnings update. Overall, analysts seem cautiously optimistic, with profits predicted to increase by 15% next year relative to the past 5-year average growth rate of -8.5%. Presently, with latest-twelve-month earnings at €61m, we should see this growing to €70m by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

Check out our latest analysis for ElringKlinger

How will ElringKlinger perform in the near future?

The longer term expectations from the 16 analysts of ZIL2 is tilted towards the positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To get an idea of the overall earnings growth trend for ZIL2, 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.

DB:ZIL2 Future Profit October 29th 18
DB:ZIL2 Future Profit October 29th 18

By 2021, ZIL2’s earnings should reach €73m, from current levels of €70m, resulting in an annual growth rate of 8.6%. This leads to an EPS of €1.37 in the final year of projections relative to the current EPS of €1.1. The bottom-line growth seems to be caused by cost-cutting initiatives, since top-line is predicted to rise at a slower pace than earnings. However, the expansion of the current 4.2% margin is not expected to be sustained, as it begins to contract to 4.0% by the end of 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For ElringKlinger, there are three key aspects 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. Future Earnings: How does ElringKlinger’s growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.

  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of ElringKlinger? 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 editorial-team@simplywallst.com.