Based on Coca-Cola Amatil Limited’s (ASX:CCL) recently announced earnings update on 31 December 2018, analyst forecasts seem bearish, with earnings expected to decline by -9.4% in the upcoming year relative to the past 5-year average growth rate of 22%. With trailing-twelve-month net income at current levels of AU$402m, the consensus growth rate suggests that earnings will decline to AU$364m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those interested in more of an analysis of the company, you can research its fundamentals here.
How is Coca-Cola Amatil going to perform in the near future?
Over the next three years, it seems the consensus view of the 11 analysts covering CCL is skewed towards the 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 understand the overall trajectory of CCL’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
This results in an annual growth rate of 1.3% based on the most recent earnings level of AU$402m to the final forecast of AU$405m by 2022. EPS reaches A$0.56 in the final year of forecast compared to the current A$0.55 EPS today. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 8.4% to 7.7% by the end of 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Coca-Cola Amatil, I’ve compiled three important 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 Coca-Cola Amatil 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 Coca-Cola Amatil is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Coca-Cola Amatil? 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.