Shareholders will be ecstatic, with their stake up 21% over the past week following Ambu A/S's (CPH:AMBU B) latest full-year results. Revenues of ø2.8b were in line with forecasts, although earnings per share (EPS) came in below expectations at ø1.28, missing estimates by 3.2%. 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. We've gathered the most recent forecasts to see whether analysts have changed their earnings models, following these results.
After the latest results, the five analysts covering Ambu are now predicting revenues of ø3.42b in 2020. If met, this would reflect a huge 21% improvement in sales compared to the last 12 months. Earnings per share are expected to decrease 8.0% to ø1.19 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of ø3.43b and earnings per share (EPS) of ø1.59 in 2020. Analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a large cut to EPS estimates.
Despite cutting their earnings forecasts, analysts have lifted their price target 10% to ø127, suggesting that these impacts are not expected to weigh on the stock's value in the long term. 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. The most optimistic Ambu analyst has a price target of ø170 per share, while the most pessimistic values it at ø78.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Further, we can compare these estimates to past performance, and see how Ambu forecasts compare to the wider market's forecast performance. Analysts are definitely expecting Ambu's growth to accelerate, with the forecast 21% growth ranking favourably alongside historical growth of 12% per annum over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 8.9% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Ambu is expected to grow much 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 Ambu. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on Ambu. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Ambu analysts - going out to 2022, and you can see them free on our platform here.
You can also view our analysis of Ambu's balance sheet, and whether we think Ambu is carrying too much debt, for free on our platform here.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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.