American Software, Inc. (NASDAQ:AMSW.A) shares fell 5.7% to US$15.93 in the week since its latest quarterly results. American Software reported in line with analyst predictions, delivering revenues of US$28m and earnings per share of US$0.05, suggesting the business is executing well and in line with its plan. 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've gathered the most recent forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the latest consensus from American Software's two analysts is for revenues of US$111.8m in 2020, which would reflect a credible 2.7% improvement in sales compared to the last 12 months. Earnings per share are forecast to plummet 27% to US$0.17 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of US$112.4m and earnings per share (EPS) of US$0.18 in 2020. So there's definitely been a decline in analyst sentiment after the latest results, noting the substantial drop in new EPS forecasts.
Although analysts have revised their earnings forecasts for next year, they've also lifted the consensus price target 5.9% to US$18.00, suggesting the revised estimates are not indicative of a weaker long-term future for the business.
Further, we can compare these estimates to past performance, and see how American Software forecasts compare to the wider market's forecast performance. Analysts are definitely expecting American Software's growth to accelerate, with the forecast 2.7% growth ranking favourably alongside historical growth of 1.1% 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 12% per year. It seems obvious that, while the future growth outlook is brighter than the recent past, analysts also expect American Software to grow slower than the wider market.
The Bottom Line
The biggest highlight of the new consensus is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for American Software. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have analyst estimates for American Software going out as far as 2024, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
If you spot an error that warrants correction, please contact the editor at email@example.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.