Earnings Beat: Funding Circle Holdings plc (LON:FCH) Just Beat Analyst Forecasts, And Analysts Have Been Lifting Their Forecasts
It's been a pretty great week for Funding Circle Holdings plc (LON:FCH) shareholders, with its shares surging 20% to UK£1.67 in the week since its latest full-year results. Revenues fell badly short of expectations, with sales of UK£104m being some 22% below what the analysts had forecast. Statutory losses were in line with forecasts, with Funding Circle Holdings losing UK£0.31 a share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
View our latest analysis for Funding Circle Holdings
After the latest results, the four analysts covering Funding Circle Holdings are now predicting revenues of UK£213.5m in 2021. If met, this would reflect a sizeable 106% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 92% to UK£0.025. Before this earnings announcement, the analysts had been modelling revenues of UK£201.9m and losses of UK£0.028 per share in 2021. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a notable improvement in loss per share in particular.
There was no major change to the consensus price target of UK£1.83, perhaps suggesting that the analysts remain concerned about ongoing losses despite the improved earnings and revenue outlook. 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. There are some variant perceptions on Funding Circle Holdings, with the most bullish analyst valuing it at UK£4.57 and the most bearish at UK£0.75 per share. 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.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting Funding Circle Holdings' growth to accelerate, with the forecast 106% annualised growth to the end of 2021 ranking favourably alongside historical growth of 14% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 22% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Funding Circle Holdings is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. The consensus price target held steady at UK£1.83, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Funding Circle Holdings going out to 2025, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 2 warning signs for Funding Circle Holdings that you need to be mindful of.
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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