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What Do Investors Need To Know About Galp Energia, SGPS, S.A.’s (ELI:GALP) Future?

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Grace Strickland
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In September 2018, Galp Energia, SGPS, S.A. (ELI:GALP) released its earnings update. Generally, the consensus outlook from analysts appear pessimistic, with profits predicted to drop by -12% next year against the past 5-year average growth rate of 50%. Currently with a trailing-twelve-month profit of €614m, the consensus growth rate suggests that earnings will drop to €543m by 2020. Below is a brief commentary on the longer term outlook the market has for Galp Energia SGPS. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

See our latest analysis for Galp Energia SGPS

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What can we expect from Galp Energia SGPS in the longer term?

The longer term expectations from the 17 analysts of GALP is tilted towards the positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To get an idea of the overall earnings growth trend for GALP, 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.

ENXTLS:GALP Future Profit January 18th 19
ENXTLS:GALP Future Profit January 18th 19

From the current net income level of €614m and the final forecast of €666m by 2022, the annual rate of growth for GALP’s earnings is 7.4%. This leads to an EPS of €1.2 in the final year of projections relative to the current EPS of €0.74. However, the near term margins may change heading into 2022, from the current levels of 4.0% to 3.9%.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Galp Energia SGPS, I’ve compiled three fundamental 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. Valuation: What is Galp Energia SGPS 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 Galp Energia SGPS is currently mispriced by the market.

  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Galp Energia SGPS? 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.