There's been a notable change in appetite for CanWel Building Materials Group Ltd. (TSE:CWX) shares in the week since its yearly report, with the stock down 19% to CA$3.85. Revenues were CA$1.3b, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of CA$0.22 were also better than expected, beating analyst predictions by 16%. 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 thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.
After the latest results, the seven analysts covering CanWel Building Materials Group are now predicting revenues of CA$1.41b in 2020. If met, this would reflect a satisfactory 5.4% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to bounce 35% to CA$0.30. Before this earnings report, analysts had been forecasting revenues of CA$1.44b and earnings per share (EPS) of CA$0.29 in 2020. The consensus seems maybe a little more pessimistic, trimming their revenue forecasts after the latest results even though there was no change to its EPS estimates.
The average analyst price target was reduced 8.3% to CA$5.10, with the lower revenue forecasts indicating negative sentiment towards CanWel Building Materials Group, even though earnings forecasts were unchanged. 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 CanWel Building Materials Group, with the most bullish analyst valuing it at CA$6.00 and the most bearish at CA$4.50 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.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the CanWel Building Materials Group's past performance and to peers in the same market. We would highlight that CanWel Building Materials Group's revenue growth is expected to slow, with forecast 5.4% increase next year well below the historical 13%p.a. growth over the last five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 3.1% next year. So it's pretty clear that, while CanWel Building Materials Group's revenue growth is expected to slow, it's still expected to grow faster than the market itself.
The Bottom Line
The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Unfortunately analysts also downgraded their revenue estimates, although industry data suggests that CanWel Building Materials Group's revenues are expected to grow faster than the wider market. Still, earnings are more important to the long-term value of the business. 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.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for CanWel Building Materials Group going out to 2021, and you can see them free on our platform here.
It might also be worth considering whether CanWel Building Materials Group's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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