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After Rheinmetall AG’s (FRA:RHM) earnings announcement in June 2018, it seems that analyst forecasts are fairly optimistic, with profits predicted to increase by 23.33% next year against the past 5-year average growth rate of 6.86%. Currently with trailing-twelve-month earnings of €234.00m, we can expect this to reach €288.59m by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
See our latest analysis for Rheinmetall
What can we expect from Rheinmetall in the longer term?
The longer term view from the 17 analysts covering RHM 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 get an idea of the overall earnings growth trend for RHM, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
From the current net income level of €224.00m and the final forecast of €318.75m by 2021, the annual rate of growth for RHM’s earnings is 7.46%. This leads to an EPS of €7.85 in the final year of projections relative to the current EPS of €5.23. Earnings growth appears to be a result of cost cutting activities, as revenues is expected to grow much slower than earnings. With a current profit margin of 3.80%, this movement will result in a margin of 4.27% by 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Rheinmetall, there are three pertinent factors you should further research:
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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 Rheinmetall 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 Rheinmetall 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 Rheinmetall? 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.