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Looking at Sodexo SA’s (EPA:SW) earnings update on 31 August 2018, it seems that analyst forecasts are fairly optimistic, as a 16% increase in profits is expected in the upcoming year, relative to the past 5-year average growth rate of 8.8%. With trailing-twelve-month net income at current levels of €651m, we should see this rise to €754m in 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
See our latest analysis for Sodexo
How will Sodexo perform in the near future?
The 18 analysts covering SW view its longer term outlook with a positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. 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.
This results in an annual growth rate of 9.4% based on the most recent earnings level of €651m to the final forecast of €869m by 2021. EPS reaches €5.87 in the final year of forecast compared to the current €4.4 EPS today. Earnings growth appears to be a result of cost cutting activities, as revenues is expected to grow much slower than earnings. Margins is currently sitting at 3.2%, which is expected to expand to 3.8% by 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Sodexo, there are three key aspects you should further examine:
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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.
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Valuation: What is Sodexo 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 Sodexo is currently mispriced by the market.
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Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Sodexo? 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.