There's been a major selloff in Vera Bradley, Inc. (NASDAQ:VRA) shares in the week since it released its annual report, with the stock down 41% to US$4.85. It looks like a pretty bad result, all things considered. Although revenues of US$495m were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 42% to hit US$0.47 per share. Following the result, 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've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
After the latest results, the five analysts covering Vera Bradley are now predicting revenues of US$557.6m in 2021. If met, this would reflect a solid 13% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to shoot up 105% to US$0.97. Yet prior to the latest earnings, analysts had been forecasting revenues of US$560.7m and earnings per share (EPS) of US$1.07 in 2021. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a minor downgrade to their earnings per share forecasts.
It might be a surprise to learn that the consensus price target fell 18% to US$11.25, with analysts clearly linking lower forecast earnings to the performance of the stock price. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Vera Bradley analyst has a price target of US$16.00 per share, while the most pessimistic values it at US$7.00. 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.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Vera Bradley's past performance and to peers in the same market. One thing stands out from these estimates, which is that analysts are forecasting Vera Bradley to grow faster in the future than it has in the past, with revenues expected to grow 13%. If achieved, this would be a much better result than the 3.4% annual decline over the past five years. Compare this against analyst estimates for the wider market, which suggest that (in aggregate) market revenues are expected to grow 7.2% next year. So it looks like Vera Bradley is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that Vera Bradley's revenues are expected to grow faster than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Vera Bradley's future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on Vera Bradley. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Vera Bradley going out to 2022, and you can see them free on our platform here..
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