Shareholders of DiaSorin S.p.A. (BIT:DIA) will be pleased this week, given that the stock price is up 18% to €184 following its latest first-quarter results. The results were positive, with revenue coming in at €175m, beating analyst expectations by 4.2%. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
After the latest results, the seven analysts covering DiaSorin are now predicting revenues of €803.5m in 2020. If met, this would reflect a meaningful 13% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to climb 20% to €3.79. Before this earnings report, the analysts had been forecasting revenues of €746.9m and earnings per share (EPS) of €3.20 in 2020. So it seems there's been a definite increase in optimism about DiaSorin's future following the latest results, with a substantial gain in the earnings per share forecasts in particular.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 21% to €135 per share. 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. The most optimistic DiaSorin analyst has a price target of €193 per share, while the most pessimistic values it at €89.60. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
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. It's clear from the latest estimates that DiaSorin's rate of growth is expected to accelerate meaningfully, with the forecast 13% revenue growth noticeably faster than its historical growth of 8.9%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 7.7% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that DiaSorin is expected to grow much faster than its industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around DiaSorin's earnings potential next year. 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.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for DiaSorin going out to 2024, and you can see them free on our platform here..
And what about risks? Every company has them, and we've spotted 1 warning sign for DiaSorin you should know about.
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