What Are Analysts Saying About SAP SE’s (FRA:SAP) Future?

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Looking at SAP SE’s (FRA:SAP) recent earnings update on 31 December 2018, the consensus outlook from analysts appear bearish, as a -5.2% fall in profits is expected in the upcoming year relative to the past 5-year average growth rate of 6.2%. Currently with a trailing-twelve-month profit of €4.1b, the consensus growth rate suggests that earnings will drop to €3.9b by 2020. Below is a brief commentary on the longer term outlook the market has for SAP. For those interested in more of an analysis of the company, you can research its fundamentals here.

See our latest analysis for SAP

How is SAP going to perform in the near future?

The 33 analysts covering SAP view its longer term outlook with a positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of SAP’s earnings growth over these next few years.

DB:SAP Future Profit February 16th 19
DB:SAP Future Profit February 16th 19

By 2022, SAP’s earnings should reach €5.8b, from current levels of €4.1b, resulting in an annual growth rate of 12%. This leads to an EPS of €4.85 in the final year of projections relative to the current EPS of €3.42. With a current profit margin of 17%, this movement will result in a margin of 18% by 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For SAP, there are three essential factors 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 SAP 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 SAP is currently mispriced by the market.

  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of SAP? 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.