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Earnings Update: Here's Why Analysts Just Lifted Their Photronics, Inc. Price Target To US$15.33

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The investors in Photronics, Inc.'s (NASDAQ:PLAB) will be rubbing their hands together with glee today, after the share price leapt 29% to US$15.94 in the week following its full-year results. Revenues of US$551m were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$0.44, missing estimates by 2.2%. Earnings are an important time for investors, as they can track a company's performance, look at what top 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 analysts' latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Photronics

NasdaqGS:PLAB Past and Future Earnings, December 16th 2019
NasdaqGS:PLAB Past and Future Earnings, December 16th 2019

Following the latest results, Photronics's three analysts are now forecasting revenues of US$639.0m in 2020. This would be a notable 16% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to shoot up 92% to US$0.86. Before this earnings report, analysts had been forecasting revenues of US$628.0m and earnings per share (EPS) of US$0.75 in 2020. Although the revenue estimates have not really changed, we can see there's been a solid gain to earnings per share expectations, suggesting that analysts have become more bullish after the latest result.

The consensus price target rose 21% to US$15.33, suggesting that higher earnings estimates flow through to the stock's valuation as well. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Photronics at US$18.00 per share, while the most bearish prices it at US$11.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. Analysts are definitely expecting Photronics's growth to accelerate, with the forecast 16% growth ranking favourably alongside historical growth of 1.6% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 7.4% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Photronics is expected to grow much faster than its market.

The Bottom Line

The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Photronics following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that Photronics's revenues are expected to grow faster than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Photronics analysts - going out to 2021, and you can see them free on our platform here.

You can also see our analysis of Photronics's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.