AB Dynamics plc Just Missed EPS By 28%: Here's What Analysts Think Will Happen Next
It's been a mediocre week for AB Dynamics plc (LON:ABDP) shareholders, with the stock dropping 15% to UK£18.10 in the week since its latest yearly results. Statutory earnings per share fell badly short of expectations, coming in at UK£0.20, some 28% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at UK£62m. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Check out our latest analysis for AB Dynamics
Following last week's earnings report, AB Dynamics' seven analysts are forecasting 2021 revenues to be UK£62.2m, approximately in line with the last 12 months. Per-share earnings are expected to shoot up 63% to UK£0.33. In the lead-up to this report, the analysts had been modelling revenues of UK£67.2m and earnings per share (EPS) of UK£0.40 in 2021. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a substantial drop in earnings per share estimates.
The analysts made no major changes to their price target of UK£21.67, suggesting the downgrades are not expected to have a long-term impact on AB Dynamics' valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic AB Dynamics analyst has a price target of UK£23.00 per share, while the most pessimistic values it at UK£20.00. This is a very narrow spread of estimates, implying either that AB Dynamics is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that AB Dynamics' revenue growth will slow down substantially, with revenues next year expected to grow 1.0%, compared to a historical growth rate of 30% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 10% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than AB Dynamics.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for AB Dynamics. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at UK£21.67, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on AB Dynamics. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple AB Dynamics analysts - going out to 2023, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 1 warning sign for AB Dynamics that you should be aware of.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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