It's been a mediocre week for Altus Group Limited (TSE:AIF) shareholders, with the stock dropping 11% to CA$51.55 in the week since its latest third-quarter results. It looks like a credible result overall - although revenues of CA$135m were what the analysts expected, Altus Group surprised by delivering a (statutory) profit of CA$0.22 per share, an impressive 26% above what was forecast. Following the result, the 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the consensus forecast from Altus Group's eight analysts is for revenues of CA$614.3m in 2021, which would reflect a credible 2.1% improvement in sales compared to the last 12 months. Per-share earnings are expected to jump 132% to CA$1.33. Yet prior to the latest earnings, the analysts had been anticipated revenues of CA$626.2m and earnings per share (EPS) of CA$1.53 in 2021. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a substantial drop in EPS estimates.
Althoughthe analysts have revised their earnings forecasts for next year, they've also lifted the consensus price target 9.6% to CA$56.57, suggesting the revised estimates are not indicative of a weaker long-term future for the business. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Altus Group, with the most bullish analyst valuing it at CA$65.00 and the most bearish at CA$47.50 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Altus Group's revenue growth will slow down substantially, with revenues next year expected to grow 2.1%, compared to a historical growth rate of 7.6% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 7.6% next year. Factoring in the forecast slowdown in growth, it seems obvious that Altus Group is also expected to grow slower than other industry participants.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Altus Group. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Altus Group's revenues are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
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 Altus Group analysts - going out to 2022, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 2 warning signs for Altus Group 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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