It's been a good week for Dechra Pharmaceuticals PLC (LON:DPH) shareholders, because the company has just released its latest annual results, and the shares gained 6.1% to UK£32.76. Revenues were UK£515m, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at UK£0.33, an impressive 26% ahead of estimates. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Following the latest results, Dechra Pharmaceuticals' ten analysts are now forecasting revenues of UK£564.9m in 2021. This would be a meaningful 9.7% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to climb 14% to UK£0.38. Yet prior to the latest earnings, the analysts had been anticipated revenues of UK£571.1m and earnings per share (EPS) of UK£0.36 in 2021. So the consensus seems to have become somewhat more optimistic on Dechra Pharmaceuticals' earnings potential following these results.
There's been no major changes to the consensus price target of UK£31.34, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. 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 Dechra Pharmaceuticals at UK£35.15 per share, while the most bearish prices it at UK£28.00. This is a very narrow spread of estimates, implying either that Dechra Pharmaceuticals is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Dechra Pharmaceuticals' revenue growth is expected to slow, with forecast 9.7% increase next year well below the historical 19%p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 8.1% next year. Factoring in the forecast slowdown in growth, it looks like Dechra Pharmaceuticals is forecast to grow at about the same rate as the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Dechra Pharmaceuticals' earnings potential next year. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. The consensus price target held steady at UK£31.34, with the latest estimates not enough to have an impact on their price targets.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Dechra Pharmaceuticals going out to 2024, and you can see them free on our platform here..
Plus, you should also learn about the 2 warning signs we've spotted with Dechra Pharmaceuticals .
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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