Pact Group Holdings Ltd (ASX:PGH) shares fell 6.6% to AU$2.42 in the week since its latest interim results. Revenues came in 4.4% below expectations, at AU$885m. Statutory earnings per share were relatively better off, with a per-share profit of AU$0.10 being roughly in line with analyst estimates. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, Pact Group Holdings's six analysts currently expect revenues in 2020 to be AU$1.79b, approximately in line with the last 12 months. Statutory per-share earnings are expected to be AU$0.19, roughly flat on the last 12 months. In the lead-up to this report, analysts had been modelling revenues of AU$1.85b and earnings per share (EPS) of AU$0.20 in 2020. Analysts are less bullish than they were before these results, given the reduced revenue forecasts and the small dip in earnings per share expectations.
The consensus price target fell 5.1% to AU$2.97, with the weaker earnings outlook clearly leading analyst valuation estimates. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Pact Group Holdings, with the most bullish analyst valuing it at AU$3.60 and the most bearish at AU$2.54 per share. 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.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. These estimates imply that sales are expected to slow, with a forecast revenue decline of 0.5% a significant reduction from annual growth of 9.1% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 5.1% annually for the foreseeable future. It's pretty clear that Pact Group Holdings's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Pact Group Holdings. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on Pact Group Holdings. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Pact Group Holdings analysts - going out to 2022, and you can see them free on our platform here.
You can also see whether Pact Group Holdings is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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