It's been a good week for Calavo Growers, Inc. (NASDAQ:CVGW) shareholders, because the company has just released its latest yearly results, and the shares gained 5.7% to US$91.88. Results were roughly in line with estimates, with revenues of US$1.2b and statutory earnings per share of US$2.08. Following the result, 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following the latest results, Calavo Growers's three analysts are now forecasting revenues of US$1.28b in 2020. This would be an okay 7.4% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to surge 47% to US$3.07. In the lead-up to this report, analysts had been modelling revenues of US$1.30b and earnings per share (EPS) of US$2.95 in 2020. So the consensus seems to have become somewhat more optimistic on Calavo Growers's earnings potential following these results.
There's been no major changes to the consensus price target of US$97.67, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. 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. There are some variant perceptions on Calavo Growers, with the most bullish analyst valuing it at US$104 and the most bearish at US$89.00 per share. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
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. We can infer from the latest estimates that analysts are expecting a continuation of Calavo Growers's historical trends, as next year's forecast 7.4% revenue growth is roughly in line with 8.4% annual revenue growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 2.8% per year. So although Calavo Growers is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider market.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Calavo Growers following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that Calavo Growers's revenues are expected to grow faster than the wider market. 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.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Calavo Growers analysts - going out to 2021, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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