Indra Sistemas, S.A. (BME:IDR): Are Analysts Bullish?

Simply Wall St

Indra Sistemas, S.A.’s (BME:IDR) latest earnings update in December 2018 confirmed that the business faced a slight headwind with earnings declining from €127m to €120m, a change of -5.6%. Below is my commentary, albeit very simple and high-level, on how market analysts perceive Indra Sistemas’s earnings growth trajectory over the next few years and whether the future looks brighter. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.

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Market analysts’ consensus outlook for the coming year seems buoyant, with earnings increasing by a robust 20%. This growth seems to continue into the following year with rates arriving at double digit 38% compared to today’s earnings, and finally hitting €179m by 2022.

BME:IDR Past and Future Earnings, March 24th 2019

Although it is useful to understand the growth each year relative to today’s level, it may be more insightful estimating the rate at which the business is growing on average every year. The benefit of this technique is that we can get a better picture of the direction of Indra Sistemas’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate 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 13%. This means that, we can expect Indra Sistemas will grow its earnings by 13% every year for the next few years.

Next Steps:

For Indra Sistemas, there are three key 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 IDR 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 IDR is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of IDR? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.