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Capitol Health Limited Just Missed Earnings - But Analysts Have Updated Their Models

·3 min read

The full-year results for Capitol Health Limited (ASX:CAJ) were released last week, making it a good time to revisit its performance. It looks like a pretty bad result, all things considered. Although revenues of AU$184m were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 22% to hit AU$0.01 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Capitol Health after the latest results.

Check out our latest analysis for Capitol Health

earnings-and-revenue-growth
earnings-and-revenue-growth

Taking into account the latest results, the current consensus from Capitol Health's four analysts is for revenues of AU$213.7m in 2023, which would reflect a solid 16% increase on its sales over the past 12 months. Statutory earnings per share are predicted to shoot up 36% to AU$0.014. Yet prior to the latest earnings, the analysts had been anticipated revenues of AU$194.9m and earnings per share (EPS) of AU$0.016 in 2023. While next year's revenue estimates increased, there was also a real cut to EPS expectations, suggesting the consensus has a bit of a mixed view of these results.

The analysts also upgraded Capitol Health's price target 7.0% to AU$0.43, implying that the higher sales are expected to generate enough value to offset the forecast decline in earnings. 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. The most optimistic Capitol Health analyst has a price target of AU$0.48 per share, while the most pessimistic values it at AU$0.42. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting Capitol Health's growth to accelerate, with the forecast 16% annualised growth to the end of 2023 ranking favourably alongside historical growth of 11% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 2.1% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Capitol Health to grow faster than the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Capitol Health. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is 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.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Capitol Health going out to 2025, and you can see them free on our platform here..

Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Capitol Health that you should be aware of.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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