Last week, you might have seen that AB Dynamics Plc (LON:ABDP) released its annual result to the market. The early response was not positive, with shares down 9.8% to UK£24.80 in the past week. Sales of UK£58m surpassed estimates by 5.1%, although earnings per share missed badly, coming in 23% below expectations at UK£0.42 per share. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the most recent consensus for AB Dynamics from five analysts is for revenues of UK£75.1m in 2020, which is a sizeable 30% increase on its sales over the past 12 months. Earnings per share are expected to increase 2.7% to UK£0.44. In the lead-up to this report, analysts had been modelling revenues of UK£73.6m and earnings per share (EPS) of UK£0.64 in 2020. While next year's revenue estimates increased, there was also a large cut to EPS expectations, suggesting the consensus has a bit of a mixed view of these results.
The consensus price target was unchanged at UK£29.27, suggesting the business is performing roughly in line with expectations, despite some adjustments to profit and revenue forecasts. 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. Currently, the most bullish analyst values AB Dynamics at UK£32.00 per share, while the most bearish prices it at UK£26.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. Next year brings more of the same, according to analysts, with revenue forecast to grow 30%, in line with its 29% annual growth over the past five years. Compare this with the wider market, which analyst estimates (in aggregate) suggest will see revenues grow 3.6% next year. So it's pretty clear that AB Dynamics is forecast to grow substantially faster than its market.
The Bottom Line
The biggest highlight of the new consensus is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for AB Dynamics. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider market. The consensus price target held steady at UK£29.27, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for AB Dynamics going out to 2022, and you can see them free on our platform here.
We also provide an overview of the AB Dynamics Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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