It's shaping up to be a tough period for Aspen Technology, Inc. (NASDAQ:AZPN), which a week ago released some disappointing third-quarter results that could have a notable impact on how the market views the stock. Results look to have been somewhat negative - revenue fell 6.5% short of analyst estimates at US$132m, and statutory earnings of US$0.64 per share missed forecasts by 4.5%. 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.
Taking into account the latest results, the consensus forecast from Aspen Technology's eight analysts is for revenues of US$610.0m in 2021, which would reflect a reasonable 4.0% improvement in sales compared to the last 12 months. Statutory per share are forecast to be US$3.34, approximately in line with the last 12 months. In the lead-up to this report, the analysts had been modelling revenues of US$635.5m and earnings per share (EPS) of US$3.56 in 2021. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the minor downgrade to earnings per share expectations.
It'll come as no surprise then, to learn thatthe analysts have cut their price target 5.4% to US$118. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Aspen Technology, with the most bullish analyst valuing it at US$145 and the most bearish at US$100.00 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Aspen Technology's revenue growth is expected to slow, with forecast 4.0% increase next year well below the historical 6.6%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 12% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Aspen Technology.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Aspen Technology's future valuation.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Aspen Technology going out to 2022, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 2 warning signs for Aspen Technology that you need to be mindful of.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.