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Umicore SA (EBR:UMI): Poised For Long-Term Success?

Simply Wall St

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In December 2018, Umicore SA (EBR:UMI) announced its latest earnings update, which showed that the company experienced a robust tailwind, eventuating to a double-digit earnings growth of 48%. Investors may find it useful to understand how market analysts perceive Umicore's earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.

Check out our latest analysis for Umicore

Market analysts' prospects for this coming year seems pessimistic, with earnings declining by -4.4%. But in the following year, there is a complete contrast in performance, with reaching double digit 14% compared to today’s level and continues to increase to €417m in 2022.

ENXTBR:UMI Past and Future Earnings, June 7th 2019

While it’s helpful to understand the rate of growth year by year relative to today’s figure, it may be more insightful evaluating the rate at which the business is moving on average every year. The advantage of this approach is that we can get a bigger picture of the direction of Umicore'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 11%. This means, we can anticipate Umicore will grow its earnings by 11% every year for the next couple of years.

Next Steps:

For Umicore, there are three essential aspects you should further examine:

  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 UMI 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 UMI is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of UMI? 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.