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D2L Inc. (TSE:DTOL) shareholders are probably feeling a little disappointed, since its shares fell 9.1% to CA$6.82 in the week after its latest first-quarter results. It looks like the results were pretty good overall. While revenues of US$42m were in line with analyst predictions, statutory losses were much smaller than expected, with D2L losing US$0.09 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the current consensus from D2L's six analysts is for revenues of US$176.4m in 2023, which would reflect a meaningful 11% increase on its sales over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 66% to US$0.43. Before this earnings announcement, the analysts had been modelling revenues of US$180.4m and losses of US$0.56 per share in 2023. While the revenue estimates fell, sentiment seems to have improved, with the analysts making a very favorable reduction to losses per share in particular.
The analysts have cut their price target 32% to CA$14.58per share, suggesting that the declining revenue was a more crucial indicator than the forecast reduction in losses. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values D2L at CA$20.00 per share, while the most bearish prices it at CA$8.50. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that D2L's revenue growth is expected to slow, with the forecast 15% annualised growth rate until the end of 2023 being well below the historical 21% 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 6.3% annually. So it's pretty clear that, while D2L's 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 reconfirmed their loss per share estimates for next year. They also downgraded their revenue estimates, although industry data suggests that D2L's revenues are expected to grow faster than the wider industry. Still, earnings per share are more important to value creation for shareholders. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on D2L. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple D2L analysts - going out to 2025, and you can see them free on our platform here.
It is also worth noting that we have found 2 warning signs for D2L that you need to take into consideration.
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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.