Shareholders will be ecstatic, with their stake up 20% over the past week following Raven Industries, Inc.'s (NASDAQ:RAVN) latest full-year results. The result was positive overall - although revenues of US$383m were in line with what the analysts predicted, Raven Industries surprised by delivering a statutory profit of US$0.97 per share, modestly greater than expected. The 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 statutory forecasts to see whether the analysts have changed their earnings models, following these results.
After the latest results, the three analysts covering Raven Industries are now predicting revenues of US$404.8m in 2021. If met, this would reflect a reasonable 5.8% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to sink 19% to US$0.80 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$423.5m and earnings per share (EPS) of US$0.73 in 2021. If anything, the analysts look to have become slightly more optimistic overall; while they decreased their revenue forecasts, EPS predictions increased and ultimately earnings are more important.
The consensus price target fell 7.8% to US$31.67, with the analysts signalling that the weaker revenue outlook was a more powerful indicator than the upgraded EPS forecasts. 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. The most optimistic Raven Industries analyst has a price target of US$40.00 per share, while the most pessimistic values it at US$19.00. 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.
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. Next year brings more of the same, according to the analysts, with revenue forecast to grow 5.8%, in line with its 7.0% annual growth over the past five years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 2.7% next year. So although Raven Industries is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Raven Industries following these results. They also downgraded their revenue estimates, although industry data suggests that Raven Industries's revenues are expected to grow faster than the wider industry. Even so, earnings are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Raven Industries's future valuation.
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 estimates - from multiple Raven Industries analysts - going out to 2023, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Raven Industries that you should be aware of.
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