Analysts Have Been Trimming Their Driven Brands Holdings Inc. (NASDAQ:DRVN) Price Target After Its Latest Report
Driven Brands Holdings Inc. (NASDAQ:DRVN) shareholders are probably feeling a little disappointed, since its shares fell 5.2% to US$13.46 in the week after its latest full-year results. The statutory results were mixed overall, with revenues of US$2.3b in line with analyst forecasts, but losses of US$4.50 per share, some 4.2% larger than the analysts were predicting. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Driven Brands Holdings after the latest results.
View our latest analysis for Driven Brands Holdings
Taking into account the latest results, the current consensus from Driven Brands Holdings' eight analysts is for revenues of US$2.42b in 2024. This would reflect an okay 5.2% increase on its revenue over the past 12 months. Earnings are expected to improve, with Driven Brands Holdings forecast to report a statutory profit of US$0.73 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$2.52b and earnings per share (EPS) of US$0.81 in 2024. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a real cut to earnings per share estimates.
The consensus price target fell 5.7% to US$19.45, with the weaker earnings outlook clearly leading valuation estimates. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Driven Brands Holdings at US$25.00 per share, while the most bearish prices it at US$14.00. 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Driven Brands Holdings' past performance and to peers in the same industry. We would highlight that Driven Brands Holdings' revenue growth is expected to slow, with the forecast 5.2% annualised growth rate until the end of 2024 being well below the historical 30% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.5% per year. Factoring in the forecast slowdown in growth, it seems obvious that Driven Brands Holdings 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 Driven Brands Holdings. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Driven Brands Holdings' future valuation.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Driven Brands Holdings analysts - going out to 2026, and you can see them free on our platform here.
It might also be worth considering whether Driven Brands Holdings' debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
