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It's been a good week for ARB Corporation Limited (ASX:ARB) shareholders, because the company has just released its latest half-yearly results, and the shares gained 3.5% to AU$40.00. Results were roughly in line with estimates, with revenues of AU$284m and statutory earnings per share of AU$0.72. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
After the latest results, the six analysts covering ARB are now predicting revenues of AU$548.1m in 2021. If met, this would reflect a notable 17% improvement in sales compared to the last 12 months. Per-share earnings are expected to jump 62% to AU$1.17. Before this earnings report, the analysts had been forecasting revenues of AU$537.4m and earnings per share (EPS) of AU$1.04 in 2021. Although the revenue estimates have not really changed, we can see there's been a decent improvement in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.
The consensus price target rose 5.1% to AU$32.98, suggesting that higher earnings estimates flow through to the stock's valuation as well. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values ARB at AU$42.30 per share, while the most bearish prices it at AU$18.50. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the ARB's past performance and to peers in the same industry. It's clear from the latest estimates that ARB's rate of growth is expected to accelerate meaningfully, with the forecast 17% revenue growth noticeably faster than its historical growth of 4.7% over the past year. Compare this with other companies in the same industry, which are forecast to grow their revenue 12% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that ARB is expected to grow much faster than its 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 ARB following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for ARB going out to 2023, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 1 warning sign for ARB that 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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