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Topdanmark A/S (CPH:TOP): Earnings Growth Remains Elusive

Gabriel Boyd

Since Topdanmark A/S (CPH:TOP) released its earnings in September 2018, the consensus outlook from analysts appear pessimistic, with earnings expected to decline by -2.3% in the upcoming year relative to the past 5-year average growth rate of 2.0%. Currently with a trailing-twelve-month profit of ø1.7b, the consensus growth rate suggests that earnings will drop to ø1.7b 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.

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Exciting times ahead?

The view from 9 analysts over the next three years is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. 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.

CPSE:TOP Future Profit January 17th 19

From the current net income level of ø1.7b and the final forecast of ø1.7b by 2022, the annual rate of growth for TOP’s earnings is 1.7%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of DKK16.61 in the final year of forecast compared to the current DKK20.22 EPS today. With a current profit margin of 8.3%, this movement will result in a margin of 18% by 2022.

Next Steps:

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