AMERISAFE, Inc. (NASDAQ:AMSF) just released its third-quarter report and things are looking bullish. The company beat both earnings and revenue forecasts, with revenue of US$83m, some 2.9% above estimates, and statutory earnings per share (EPS) coming in at US$1.21, 69% ahead of expectations. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Following the recent earnings report, the consensus from three analysts covering AMERISAFE is for revenues of US$313.4m in 2021, implying a not inconsiderable 8.7% decline in sales compared to the last 12 months. Statutory earnings per share are forecast to crater 38% to US$2.95 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$316.7m and earnings per share (EPS) of US$2.88 in 2021. So the consensus seems to have become somewhat more optimistic on AMERISAFE's earnings potential following these results.
The consensus price target was unchanged at US$76.00, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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. Currently, the most bullish analyst values AMERISAFE at US$81.00 per share, while the most bearish prices it at US$72.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting AMERISAFE is an easy business to forecast or the the analysts are all using similar assumptions.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the AMERISAFE's past performance and to peers in the same industry. One more thing stood out to us about these estimates, and it's the idea that AMERISAFE'sdecline is expected to accelerate, with revenues forecast to fall 8.7% next year, topping off a historical decline of 2.7% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 4.6% per year. So while a broad number of companies are forecast to decline, unfortunately AMERISAFE is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards AMERISAFE 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 no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for AMERISAFE going out to 2021, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 2 warning signs for AMERISAFE (1 doesn't sit too well with us) 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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