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FirstService Corporation Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

Simply Wall St
·3 min read

FirstService Corporation (TSE:FSV) just released its quarterly report and things are looking bullish. It was overall a positive result, with revenues beating expectations by 8.2% to hit US$742m. FirstService also reported a statutory profit of US$0.75, which was an impressive 121% above what the analysts had forecast. 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.

Check out our latest analysis for FirstService

earnings-and-revenue-growth
earnings-and-revenue-growth

Taking into account the latest results, the current consensus from FirstService's eight analysts is for revenues of US$2.93b in 2021, which would reflect a solid 9.4% increase on its sales over the past 12 months. Statutory earnings per share are predicted to bounce 32% to US$2.21. In the lead-up to this report, the analysts had been modelling revenues of US$2.92b and earnings per share (EPS) of US$2.15 in 2021. So the consensus seems to have become somewhat more optimistic on FirstService's earnings potential following these results.

The consensus price target rose 42% to US$135, suggesting that higher earnings estimates flow through to the stock's valuation as well.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that FirstService's revenue growth is expected to slow, with forecast 9.4% increase next year well below the historical 16%p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 8.1% next year. So it's pretty clear that, while FirstService's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around FirstService's earnings potential next year. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for FirstService going out to 2022, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 3 warning signs for FirstService that you should be aware of.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.