There's been a notable change in appetite for Foundation Building Materials, Inc. (NYSE:FBM) shares in the week since its annual report, with the stock down 16% to US$15.70. The result was positive overall - although revenues of US$2.2b were in line with what analysts predicted, Foundation Building Materials surprised by delivering a statutory profit of US$0.93 per share, modestly greater than expected. 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 analysts have changed their earnings models, following these results.
Taking into account the latest results, the most recent consensus for Foundation Building Materials from seven analysts is for revenues of US$2.25b in 2020, which is a credible 4.6% increase on its sales over the past 12 months. Statutory earnings per share are expected to soar 21% to US$1.18. Before this earnings report, analysts had been forecasting revenues of US$2.26b and earnings per share (EPS) of US$1.12 in 2020. So the consensus seems to have become somewhat more optimistic on Foundation Building Materials's earnings potential following these results.
There's been no major changes to the consensus price target of US$22.07, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's 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. The most optimistic Foundation Building Materials analyst has a price target of US$24.00 per share, while the most pessimistic values it at US$20.00. 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 Foundation Building Materials's past performance and to peers in the same market. It's pretty clear that analysts expect Foundation Building Materials's revenue growth will slow down substantially, with revenues next year expected to grow 4.6%, compared to a historical growth rate of 22% over the past five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 4.7% next year. Factoring in the forecast slowdown in growth, it looks like analysts are expecting Foundation Building Materials to grow at about the same rate as the wider market.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Foundation Building Materials following these results. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall market. The consensus price target held steady at US$22.07, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that in mind, we wouldn't be too quick to come to a conclusion on Foundation Building Materials. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Foundation Building Materials analysts - going out to 2023, and you can see them free on our platform here.
You can also see whether Foundation Building Materials is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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