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Investors in Gentrack Group Limited (NZSE:GTK) had a good week, as its shares rose 6.4% to close at NZ$1.50 following the release of its annual results. The results don't look great, especially considering that statutory losses grew 213% toNZ$0.32 per share. Revenues of NZ$101m did beat expectations by 3.4%, but it looks like a bit of a cold comfort. 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.
After the latest results, the consensus from Gentrack Group's three analysts is for revenues of NZ$96.1m in 2021, which would reflect a perceptible 4.4% decline in sales compared to the last year of performance. The loss per share is expected to greatly reduce in the near future, narrowing 83% to NZ$0.055. Before this latest report, the consensus had been expecting revenues of NZ$94.9m and NZ$0.022 per share in losses. So it's pretty clear the analysts have mixed opinions on Gentrack Group even after this update; although they reconfirmed their revenue numbers, it came at the cost of a per-share losses.
As a result, there was no major change to the consensus price target of NZ$1.55, with the analysts implicitly confirming that the business looks to be performing in line with expectations, despite higher forecast losses. 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 Gentrack Group, with the most bullish analyst valuing it at NZ$1.75 and the most bearish at NZ$1.40 per share. This is a very narrow spread of estimates, implying either that Gentrack Group is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with the forecast 4.4% revenue decline a notable change from historical growth of 19% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 17% annually for the foreseeable future. It's pretty clear that Gentrack Group's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Gentrack Group. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Gentrack Group's revenues are expected to perform worse than the wider industry. 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.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Gentrack Group analysts - going out to 2023, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 1 warning sign for Gentrack Group 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.
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