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Shareholders in Thoughtworks Holding, Inc. (NASDAQ:TWKS) had a terrible week, as shares crashed 23% to US$14.80 in the week since its latest first-quarter results. Revenues of US$321m beat expectations by a respectable 5.5%, although statutory losses per share increased. Thoughtworks Holding lost US$0.20, which was 131% more than what the analysts had included in their models. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Thoughtworks Holding after the latest results.
Taking into account the latest results, the most recent consensus for Thoughtworks Holding from twelve analysts is for revenues of US$1.37b in 2022 which, if met, would be a decent 19% increase on its sales over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 51% to US$0.25. Before this latest report, the consensus had been expecting revenues of US$1.32b and US$0.12 per share in losses. So it's pretty clear the analysts have mixed opinions on Thoughtworks Holding even after this update; although they upped their revenue numbers, it came at the cost of a very substantial increase in per-share losses.
It will come as no surprise that expanding losses caused the consensus price target to fall 18% to US$23.00with the analysts implicitly ranking ongoing losses as a greater concern than growing revenues. 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 Thoughtworks Holding at US$26.00 per share, while the most bearish prices it at US$20.00. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that Thoughtworks Holding's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 26% growth on an annualised basis. This is compared to a historical growth rate of 40% over the past year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 12% annually. Even after the forecast slowdown in growth, it seems obvious that Thoughtworks Holding is also expected to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts increased their loss per share estimates for next year. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. 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.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Thoughtworks Holding going out to 2024, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 1 warning sign for Thoughtworks Holding you should be aware of.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.