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Grubhub Inc. (NYSE:GRUB) just released its third-quarter report and things are looking bullish. Grubhub outperformed on both revenues and the expected loss per share, with revenues of US$494m beating estimates by 17%. Statutory losses were US$0.10, 74% smaller thanthe analysts expected. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the most recent consensus for Grubhub from 28 analysts is for revenues of US$1.98b in 2021 which, if met, would be a notable 19% increase on its sales over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 34% to US$0.83. Before this latest report, the consensus had been expecting revenues of US$1.91b and US$0.93 per share in losses. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a loss per share in particular.
There was no major change to the consensus price target of US$68.11, perhaps suggesting that the analysts remain concerned about ongoing losses despite the improved earnings and revenue outlook. 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 Grubhub at US$76.00 per share, while the most bearish prices it at US$49.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Grubhub shareholders.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Grubhub's revenue growth is expected to slow, with forecast 19% increase next year well below the historical 31%p.a. growth over the last five years. Compare this to the 105 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 18% per year. Factoring in the forecast slowdown in growth, it looks like Grubhub is forecast to grow at about the same rate as the wider industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. There was also an upgrade to revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider industry. The consensus price target held steady at US$68.11, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Grubhub. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Grubhub going out to 2024, and you can see them free on our platform here..
You still need to take note of risks, for example - Grubhub has 1 warning sign we think 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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