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It's been a good week for Casa Systems, Inc. (NASDAQ:CASA) shareholders, because the company has just released its latest quarterly results, and the shares gained 2.2% to US$4.64. It was a mildly positive result, with revenues exceeding expectations at US$106m, while statutory earnings per share (EPS) of US$0.04 were in line with analyst forecasts. Following the result, the 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.
After the latest results, the seven analysts covering Casa Systems are now predicting revenues of US$400.2m in 2021. If met, this would reflect a modest 3.8% improvement in sales compared to the last 12 months. Casa Systems is also expected to turn profitable, with statutory earnings of US$0.10 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$393.3m and earnings per share (EPS) of US$0.06 in 2021. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the massive increase in earnings per share expectations following these results.
The consensus price target was unchanged at US$6.33, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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. Currently, the most bullish analyst values Casa Systems at US$8.00 per share, while the most bearish prices it at US$5.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Casa Systems shareholders.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Casa Systems' growth to accelerate, with the forecast 3.8% growth ranking favourably alongside historical growth of 0.7% per annum over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 3.2% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Casa Systems is expected to grow at about the same rate as the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Casa Systems following these results. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall 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 Casa Systems. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Casa Systems analysts - going out to 2022, and you can see them free on our platform here.
You still need to take note of risks, for example - Casa Systems has 2 warning signs (and 1 which is significant) we think 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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