Comstock Resources, Inc. (NYSE:CRK) shareholders are probably feeling a little disappointed, since its shares fell 2.8% to US$7.36 in the week after its latest quarterly results. Revenues of US$226m fell slightly short of expectations, but earnings were a definite bright spot, with statutory per-share profits of US$0.15 an impressive 105% ahead of estimates. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the consensus forecast from Comstock Resources' three analysts is for revenues of US$1.15b in 2020, which would reflect a huge 36% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to plunge 48% to US$0.28 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$1.02b and earnings per share (EPS) of US$0.37 in 2020. Although revenues are expected to increase meaningfully, the analysts have acknowledged the cost of growth, given the pretty serious reduction to EPS estimates following the latest report.
Curiously, the consensus price target rose 16% to US$8.50. We can only conclude that the forecast revenue growth is expected to offset the impact of the expected fall in earnings. 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. The most optimistic Comstock Resources analyst has a price target of US$10.00 per share, while the most pessimistic values it at US$7.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
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. We would highlight that Comstock Resources' revenue growth is expected to slow, with forecast 36% increase next year well below the historical 97% growth over the last year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 8.7% next year. So it's pretty clear that, while Comstock Resources' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
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. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on Comstock Resources. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Comstock Resources analysts - going out to 2022, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Comstock Resources (at least 2 which shouldn't be ignored) , and understanding them should be part of your investment process.
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