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Will HeidelbergCement AG's (FRA:HEI) Earnings Grow Over The Next Few Years?

Simply Wall St

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The latest earnings announcement HeidelbergCement AG (FRA:HEI) released in December 2018 confirmed that the company gained from a robust tailwind, leading to a double-digit earnings growth of 19%. Today I want to provide a brief commentary on how market analysts predict HeidelbergCement's earnings growth trajectory over the next few years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.

See our latest analysis for HeidelbergCement

Market analysts' consensus outlook for the coming year seems rather muted, with earnings growing by a single digit 8.3%. The growth outlook in the following year seems much more optimistic with rates arriving at double digit 18% compared to today’s earnings, and finally hitting €1.6b by 2022.

DB:HEI Past and Future Earnings, March 27th 2019

While it is informative knowing the growth rate year by year relative to today’s level, it may be more valuable evaluating the rate at which the business is growing every year, on average. The pro of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of HeidelbergCement's earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I've inserted a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 9.4%. This means, we can anticipate HeidelbergCement will grow its earnings by 9.4% every year for the next couple of years.

Next Steps:

For HeidelbergCement, there are three relevant 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 HEI 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 HEI is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of HEI? 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.