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Last week, you might have seen that Envista Holdings Corporation (NYSE:NVST) released its yearly result to the market. The early response was not positive, with shares down 7.0% to US$29.59 in the past week. Envista Holdings reported in line with analyst predictions, delivering revenues of US$2.8b and statutory earnings per share of US$1.60, suggesting the business is executing well and in line with its plan. 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. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
Taking into account the latest results, Envista Holdings's twelve analysts currently expect revenues in 2020 to be US$2.78b, approximately in line with the last 12 months. Statutory earnings per share are forecast to sink 18% to US$1.31 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of US$2.81b and earnings per share (EPS) of US$1.42 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share forecasts for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$33.91, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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 Envista Holdings at US$40.00 per share, while the most bearish prices it at US$30.00. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Envista Holdings's past performance and to peers in the same market. From these estimates it looks as though analysts expect the years of declining sales to come to an end, given the flat revenue forecast for next year. That would be a definite improvement, given that the past three years have seen sales shrink three years annually. Compare this against analyst estimates for the wider market, which suggest that (in aggregate) market revenues are expected to grow 7.9% next year. Although Envista Holdings's revenues are expected to improve, it seems that analysts are still expecting it to grow slower than the wider market.
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 - although our data does suggest that Envista Holdings's revenues are expected to perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Envista Holdings. Long-term earnings power is much more important than next year's profits. We have forecasts for Envista Holdings going out to 2023, and you can see them free on our platform here.
You can also see whether Envista Holdings is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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