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Analysts Are Updating Their J Sainsbury plc (LON:SBRY) Estimates After Its Half-Yearly Results

Simply Wall St
·4 min read

The half-yearly results for J Sainsbury plc (LON:SBRY) were released last week, making it a good time to revisit its performance. It was a credible result overall, with revenues of UK£15b and statutory earnings per share of UK£0.058 both in line with analyst estimates, showing that J Sainsbury is executing in line with expectations. The 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 statutory forecasts to see whether the analysts have changed their earnings models, following these results.

See our latest analysis for J Sainsbury

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Taking into account the latest results, J Sainsbury's 13 analysts currently expect revenues in 2021 to be UK£29.3b, approximately in line with the last 12 months. J Sainsbury is also expected to turn profitable, with statutory earnings of UK£0.16 per share. In the lead-up to this report, the analysts had been modelling revenues of UK£28.9b and earnings per share (EPS) of UK£0.17 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

The analysts reconfirmed their price target of UK£2.33, showing that the business is executing well and in line with expectations. 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 J Sainsbury at UK£2.80 per share, while the most bearish prices it at UK£1.80. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that there is an expectation that J Sainsbury's revenue growth will slow down substantially, with revenues next year expected to grow 1.5%, compared to a historical growth rate of 4.8% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 3.1% next year. Factoring in the forecast slowdown in growth, it seems obvious that J Sainsbury is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at UK£2.33, 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 J Sainsbury. 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 J Sainsbury going out to 2025, and you can see them free on our platform here..

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with J Sainsbury , and understanding it should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.