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Valeo SA (EPA:FR): Is It A Smart Long Term Opportunity?

Simply Wall St

In December 2018, Valeo SA (EPA:FR) released its earnings update. Generally, the consensus outlook from analysts appear somewhat bearish, with profits predicted to rise by 4.6% next year compared with the higher past 5-year average growth rate of 10%. Currently with trailing-twelve-month earnings of €546m, we can expect this to reach €571m by 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Valeo in the longer term. For those interested in more of an analysis of the company, you can research its fundamentals here.

Check out our latest analysis for Valeo

How is Valeo going to perform in the near future?

The longer term expectations from the 18 analysts of FR is tilted towards the positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To understand the overall trajectory of FR's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

ENXTPA:FR Past and Future Earnings, July 24th 2019

By 2022, FR's earnings should reach €880m, from current levels of €546m, resulting in an annual growth rate of 15%. This leads to an EPS of €3.73 in the final year of projections relative to the current EPS of €2.3. Margins are currently sitting at 2.9%, which is expected to expand to 4.1% by 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Valeo, I've compiled three key 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 Valeo 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 Valeo is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Valeo? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.