Shareholders might have noticed that American Software, Inc. (NASDAQ:AMSW.A) filed its full-year result this time last week. The early response was not positive, with shares down 9.2% to US$17.02 in the past week. Revenues were in line with forecasts, at US$115m, although statutory earnings per share came in 11% below what the analysts expected, at US$0.21 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following last week's earnings report, American Software's dual analysts are forecasting 2021 revenues to be US$117.0m, approximately in line with the last 12 months. Statutory earnings per share are expected to dive 22% to US$0.17 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$118.6m and earnings per share (EPS) of US$0.22 in 2021. So there's definitely been a decline in sentiment after the latest results, noting the pretty serious reduction to new EPS forecasts.
Despite cutting their earnings forecasts,the analysts have lifted their price target 13% to US$22.00, suggesting that these impacts are not expected to weigh on the stock's value in the long term.
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 clear from the latest estimates that American Software's rate of growth is expected to accelerate meaningfully, with the forecast 1.3% revenue growth noticeably faster than its historical growth of 0.7%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 12% per year. So it's clear that despite the acceleration in growth, American Software is expected to grow meaningfully slower than the industry average.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will 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 in mind, we wouldn't be too quick to come to a conclusion on American Software. Long-term earnings power is much more important than next year's profits. At least one analyst has provided forecasts out to 2024, which can be seen for free on our platform here.
You should always think about risks though. Case in point, we've spotted 3 warning signs for American Software you should be aware of.
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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. Thank you for reading.