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On 31 December 2018, Elia System Operator SA (EBR:ELI) released its most recent earnings update. Generally, analyst consensus outlook seem bearish, with earnings expected to decline by -10% in the upcoming year against the past 5-year average growth rate of 9.1%. Currently with a trailing-twelve-month profit of €281m, the consensus growth rate suggests that earnings will drop to €253m by 2020. Below is a brief commentary around Elia System Operator’s earnings outlook going forward, which may give you a sense of market sentiment for the company. For those interested in more of an analysis of the company, you can research its fundamentals here.
How will Elia System Operator perform in the near future?
Over the next three years, it seems the consensus view of the 4 analysts covering ELI is skewed towards the positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To get an idea of the overall earnings growth trend for ELI, 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.
From the current net income level of €281m and the final forecast of €283m by 2022, the annual rate of growth for ELI’s earnings is 0.7%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of €4.37 in the final year of forecast compared to the current €4.52 EPS today. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 15% to 12% by the end of 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Elia System Operator, I’ve put together three essential 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.
- Future Earnings: How does Elia System Operator’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.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Elia System Operator? 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 firstname.lastname@example.org. 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.