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LEONI AG (FRA:LEO): Will The Growth Last?

Devin Koller

Looking at LEONI AG’s (FRA:LEO) earnings update in March 2018, analysts seem cautiously optimistic, with profits predicted to increase by 0.66% next year relative to the past 5-year average growth rate of -11.61%. Presently, with latest-twelve-month earnings at €152.64m, we should see this growing to €153.64m by 2019. Below is a brief commentary around LEONI’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

Check out our latest analysis for LEONI

How is LEONI going to perform in the near future?

The longer term view from the 17 analysts covering LEO is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.

DB:LEO Future Profit August 15th 18

This results in an annual growth rate of 11.96% based on the most recent earnings level of €145.02m to the final forecast of €191.91m by 2021. EPS reaches €6.22 in the final year of forecast compared to the current €4.44 EPS today. Earnings growth appears to be a result of cost cutting activities, as revenues is expected to grow much slower than earnings. With a current profit margin of 2.95%, this movement will result in a margin of 3.33% by 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For LEONI, there are three essential factors 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 LEONI 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 LEONI is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of LEONI? 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.