Alithya Group Inc. (TSE:ALYA) shares fell 9.4% to CA$3.46 in the week since its latest second-quarter results. Revenues were CA$67m, with Alithya Group reporting some -8.5% below analyst expectations. 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. With this in mind, we've gathered the latest forecasts to see what analysts are expecting for next year.
After the latest results, the six analysts covering Alithya Group are now predicting revenues of CA$286.3m in 2020. If met, this would reflect a credible 5.9% improvement in sales compared to the last 12 months. Alithya Group is also expected to turn profitable, with earnings of CA$0.0033 per share. In the lead-up to this report, analysts had been modelling revenues of CA$301.9m and earnings per share (EPS) of CA$0.04 in 2020. Analysts seem less optimistic after the recent results, reducing their sales forecasts and making a pretty serious reduction to earnings per share forecasts.
It'll come as no surprise then, to learn that analysts have cut their price target 9.1% to CA$5.00. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Alithya Group at CA$6.00 per share, while the most bearish prices it at CA$4.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
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. It's pretty clear that analysts expect Alithya Group's revenue growth will slow down substantially, with revenues next year expected to grow 5.9%, compared to a historical growth rate of 69% over the past year. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 4.3% next year. So it's pretty clear that, while Alithya Group's revenue growth is expected to slow, it's still expected to grow faster than the market itself.
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 Alithya Group. Unfortunately analysts also downgraded their revenue estimates, although industry data suggests that Alithya Group's revenues are expected to grow faster than the wider market. 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 in mind, we wouldn't be too quick to come to a conclusion on Alithya Group. Long-term earnings power is much more important than next year's profits. We have forecasts for Alithya Group going out to 2021, and you can see them free on our platform here.
You can also see whether Alithya Group is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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