Based on Sectra AB (publ)’s (STO:SECT B) recently announced earnings update on 31 January 2019, it seems that analyst forecasts are fairly pessimistic, with earnings expected to decline by -3.0% in the upcoming year compared with the past 5-year average growth rate of 14%. Presently, with latest-twelve-month earnings at kr198m, we should see this fall to kr192m by 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Sectra in the longer term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

Check out our latest analysis for Sectra

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Can we expect Sectra to keep growing?

The longer term view from the 3 analysts covering SECT B is one of 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 SECT B’s earnings growth over these next few years.

This results in an annual growth rate of 9.0% based on the most recent earnings level of kr198m to the final forecast of kr244m by 2022. This leads to an EPS of SEK6.73 in the final year of projections relative to the current EPS of SEK5.22. However, the expansion of the current 15% margin is not expected to be sustained, as it begins to contract to 15% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Sectra, 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 Sectra 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 Sectra is currently mispriced by the market.

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