Shareholders might have noticed that AVEVA Group plc (LON:AVV) filed its half-yearly result this time last week. The early response was not positive, with shares down 5.5% to UK£40.54 in the past week. Revenues fell 3.4% short of expectations, at UK£333m. Earnings correspondingly dipped, with AVEVA Group reporting a statutory loss of UK£0.13 per share, whereas the analysts had previously modelled a profit in this period. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, AVEVA Group's twelve analysts currently expect revenues in 2021 to be UK£789.9m, approximately in line with the last 12 months. Statutory earnings per share are predicted to soar 64% to UK£0.32. In the lead-up to this report, the analysts had been modelling revenues of UK£800.0m and earnings per share (EPS) of UK£0.44 in 2021. So there's definitely been a decline in sentiment after the latest results, noting the pretty serious reduction to new EPS forecasts.
The consensus price target held steady at UK£44.04, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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 AVEVA Group at UK£50.00 per share, while the most bearish prices it at UK£37.70. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the AVEVA Group's past performance and to peers in the same industry. It's pretty clear that there is an expectation that AVEVA Group's revenue growth will slow down substantially, with revenues next year expected to grow 2.0%, compared to a historical growth rate of 21% over the past three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 7.5% per year. Factoring in the forecast slowdown in growth, it seems obvious that AVEVA Group is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on AVEVA Group. 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 AVEVA Group going out to 2023, and you can see them free on our platform here..
And what about risks? Every company has them, and we've spotted 3 warning signs for AVEVA Group you should know about.
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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