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After adidas AG’s (FRA:ADS) earnings announcement in June 2018, analysts seem fairly confident, as a 27.30% increase in profits is expected in the upcoming year, relative to the past 5-year average growth rate of 14.43%. With trailing-twelve-month net income at current levels of €1.50b, we should see this rise to €1.91b in 2019. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for adidas in the longer term. For those interested in more of an analysis of the company, you can research its fundamentals here.
View our latest analysis for adidas
Can we expect adidas to keep growing?
Longer term expectations from the 36 analysts covering ADS’s stock is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To understand the overall trajectory of ADS’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.
This results in an annual growth rate of 10.97% based on the most recent earnings level of €1.35b to the final forecast of €2.08b by 2021. This leads to an EPS of €11.49 in the final year of projections relative to the current EPS of €6.68. The main reason for growth is a result of cost cutting activities, as revenues is expected to grow much slower than earnings. In 2021, ADS’s profit margin will have expanded from 6.37% to 7.80%.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For adidas, there are three essential 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 adidas 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 adidas 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 adidas? 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.