The investors in Entercom Communications Corp.'s (NYSE:ETM) will be rubbing their hands together with glee today, after the share price leapt 31% to US$4.85 in the week following its quarterly results. Entercom Communications reported US$386m in revenue, roughly in line with analyst forecasts, although earnings per share (EPS) of US$0.28 beat expectations, being 3.7% higher than what analysts expected. 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 forecasts to see whether analysts have changed their earnings models, following these results.
Following the latest results, Entercom Communications's four analysts are now forecasting revenues of US$1.56b in 2020. This would be a modest 4.8% improvement in sales compared to the last 12 months. Entercom Communications is also expected to turn profitable, with earnings of US$1.08 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of US$1.52b and earnings per share (EPS) of US$1.07 in 2020. There doesn't appear to have been a major change in analyst sentiment following the results, other than the modest lift to revenue estimates.
Analysts increased their price target 8.4% to US$6.44, perhaps signalling that higher revenues are a strong leading indicator for Entercom Communications's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Entercom Communications at US$7.00 per share, while the most bearish prices it at US$5.75. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
In addition, we can look to Entercom Communications's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. It's pretty clear that analysts expect Entercom Communications's revenue growth will slow down substantially, with revenues next year expected to grow 4.8%, compared to a historical growth rate of 34% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 3.6% next year. Even after the forecast slowdown in growth, it seems obvious that analysts still thinkEntercom Communications will grow faster than the wider market.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Entercom Communications analysts - going out to 2022, and you can see them free on our platform here.
You can also view our analysis of Entercom Communications's balance sheet, and whether we think Entercom Communications is carrying too much debt, for free on our platform here.
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