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Legrand SA (EPA:LR): Should The Future Outlook Worry You?

David Rizzo

Looking at Legrand SA’s (EPA:LR) earnings update in September 2018, it seems that analyst forecasts are fairly bearish, as a -3.4% fall in profits is expected in the upcoming year against the past 5-year average growth rate of 9.0%. Currently with a trailing-twelve-month profit of €711m, the consensus growth rate suggests that earnings will drop to €687m by 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Legrand in the longer term. For those interested in more of an analysis of the company, you can research its fundamentals here.

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Exciting times ahead?

Longer term expectations from the 19 analysts covering LR’s stock is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of LR’s earnings growth over these next few years.

ENXTPA:LR Future Profit January 31st 19

By 2022, LR’s earnings should reach €756m, from current levels of €711m, resulting in an annual growth rate of 4.6%. This leads to an EPS of €3.21 in the final year of projections relative to the current EPS of €2.67. However, the expansion of the current 13% margin is not expected to be sustained, as it begins to contract to 12% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Legrand, there are three essential aspects you should look at:

  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 Legrand 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 Legrand is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Legrand? 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.