Swedbank AB (publ)'s (STO:SWED A) most recent earnings announcement in December 2018 confirmed that the company benefited from a small tailwind, eventuating to a single-digit earnings growth of 9.4%. Below is a brief commentary on my key takeaways on how market analysts perceive Swedbank's earnings growth outlook over the next few years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Market analysts' prospects for next year seems pessimistic, with earnings decreasing by -5.8%. Over the medium term, earnings are predicted to continue to be below today's level, with a reduction of -2.3% in 2021, eventually reaching kr21b in 2022.
Although it is useful to understand the rate of growth each year relative to today’s level, it may be more insightful evaluating the rate at which the earnings are rising or falling on average every year. The pro of this method is that we can get a bigger picture of the direction of Swedbank's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I put a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 0.7%. This means that, we can expect Swedbank will grow its earnings by 0.7% every year for the next few years.
For Swedbank, there are three essential factors 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.
- Valuation: What is SWED A 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 SWED A is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of SWED A? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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