Shareholders in Village Farms International, Inc. (TSE:VFF) had a terrible week, as shares crashed 23% to CA$8.31 in the week since its latest quarterly results. Revenues of US$47m beat expectations by 6.6%. Unfortunately earnings per share (EPS) fell well short of the mark, turning in a loss of US$0.10 compared to previous analyst expectations of a profit. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what analysts are forecasting for next year.
Following the latest results, Village Farms International's five analysts are now forecasting revenues of US$210.1m in 2020. This would be a major 40% improvement in sales compared to the last 12 months. Earnings per share are expected to shoot up 280% to US$0.97. In the lead-up to this report, analysts had been modelling revenues of US$229.1m and earnings per share (EPS) of US$0.98 in 2020. The consensus seems maybe a little more pessimistic, trimming their revenue forecasts after the latest results even though there was no change to its EPS estimates.
The average analyst price target was reduced 11% to CA$31.50, with the lower revenue forecasts indicating negative sentiment towards Village Farms International, even though earnings forecasts were unchanged. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Village Farms International at CA$40.00 per share, while the most bearish prices it at CA$26.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Village Farms International's performance in recent years. It's clear from the latest estimates that Village Farms International's rate of growth is expected to accelerate meaningfully, with forecast 40% revenue growth noticeably faster than its historical growth of 2.2%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 3.9% per year. It seems obvious that, while the growth outlook is brighter than the recent past, analysts also expect Village Farms International to grow faster than the wider market.
The Bottom Line
The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Unfortunately analysts also downgraded their revenue estimates, although industry data suggests that Village Farms International's revenues are expected to grow faster than the wider market. Still, earnings are more important to the long-term value of the business. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Village Farms International analysts - going out to 2021, and you can see them free on our platform here.
It might also be worth considering whether Village Farms International's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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 firstname.lastname@example.org. 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.