Ferronordic Machines AB (publ) (STO:FNM): Is It A Good Long Term Opportunity?

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In December 2018, Ferronordic Machines AB (publ) (STO:FNM) released its latest earnings announcement, which indicated that the business benefited from a significant tailwind, more than doubling its earnings from the prior year. Below is a brief commentary on my key takeaways on how market analysts predict Ferronordic Machines’s earnings growth outlook over the next few 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.

See our latest analysis for Ferronordic Machines

Market analysts’ prospects for this coming year seems optimistic, with earnings increasing by a robust 12%. This growth seems to continue into the following year with rates reaching double digit 33% compared to today’s earnings, and finally hitting kr358m by 2022.

OM:FNM Future Profit February 17th 19
OM:FNM Future Profit February 17th 19

Although it is useful to understand the growth each year relative to today’s level, it may be more insightful to gauge the rate at which the company is growing on average every year. The benefit of this approach is that we can get a better picture of the direction of Ferronordic Machines’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute 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 16%. This means that, we can anticipate Ferronordic Machines will grow its earnings by 16% every year for the next couple of years.

Next Steps:

For Ferronordic Machines, there are three relevant aspects you should look at:

  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 FNM 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 FNM is currently mispriced by the market.

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