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Grenke AG’s (ETR:GLJ) latest earnings update in December 2018 signalled that the business experienced a robust tailwind, eventuating to a double-digit earnings growth of 24%. Below, I’ve laid out key numbers on how market analysts view Grenke’s earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Analysts’ expectations for the coming year seems buoyant, with earnings climbing by a robust 20%. This growth seems to continue into the following year with rates arriving at double digit 42% compared to today’s earnings, and finally hitting €219m by 2022.
Even though it is useful to understand the growth rate each year relative to today’s level, it may be more insightful estimating the rate at which the company is moving every year, on average. The pro of this technique is that we can get a better picture of the direction of Grenke’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’ve appended 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 17%. This means that, we can assume Grenke will grow its earnings by 17% every year for the next few years.
For Grenke, I’ve compiled three essential aspects you should further examine:
- 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 GLJ 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 GLJ is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of GLJ? 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 email@example.com.