Earnings Update: Iren SpA (BIT:IRE) Just Reported And Analysts Are Trimming Their Forecasts
Last week, you might have seen that Iren SpA (BIT:IRE) released its first-quarter result to the market. The early response was not positive, with shares down 5.5% to €2.12 in the past week. Revenues were €1.1b, and Iren was a dismal 16% short 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 thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
See our latest analysis for Iren
Taking into account the latest results, the current consensus, from the four analysts covering Iren, is for revenues of €3.76b in 2020, which would reflect a perceptible 4.4% reduction in Iren's sales over the past 12 months. Statutory earnings per share are expected to shrink 6.6% to €0.16 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of €4.11b and earnings per share (EPS) of €0.17 in 2020. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the small dip in earnings per share expectations.
The consensus price target fell 11% to €2.87, with the weaker earnings outlook clearly leading valuation estimates. 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. Currently, the most bullish analyst values Iren at €3.40 per share, while the most bearish prices it at €2.60. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that sales are expected to reverse, with the forecast 4.4% revenue decline a notable change from historical growth of 9.2% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 3.8% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Iren is expected to lag the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Iren. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on Iren. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Iren analysts - going out to 2024, and you can see them free on our platform here.
Before you take the next step you should know about the 3 warning signs for Iren (1 makes us a bit uncomfortable!) that we have uncovered.
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.
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