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Genworth Mortgage Insurance Australia Limited (ASX:GMA) Reported Earnings Last Week And Analysts Are Already Upgrading Their Estimates

Simply Wall St
·4 min read

As you might know, Genworth Mortgage Insurance Australia Limited (ASX:GMA) just kicked off its latest half-yearly results with some very strong numbers. Sales crushed expectations at AU$239m, beating expectations by 27%. Genworth Mortgage Insurance Australia reported a statutory loss of AU$0.22 per share, which - although not amazing - was much smaller than the analysts predicted. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Genworth Mortgage Insurance Australia

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earnings-and-revenue-growth

Taking into account the latest results, the current consensus from Genworth Mortgage Insurance Australia's three analysts is for revenues of AU$497.2m in 2020, which would reflect a sizeable 33% increase on its sales over the past 12 months. Genworth Mortgage Insurance Australia is also expected to turn profitable, with statutory earnings of AU$0.02 per share. Before this latest report, the consensus had been expecting revenues of AU$453.9m and AU$0.023 per share in losses. So we can see there's been a pretty clear upgrade to expectations following the latest results, with a small increase to revenues expected to lead to profitability earlier than previously forecast.

With these upgrades, we're not surprised to see that the analysts have lifted their price target 6.6% to AU$2.41per share. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Genworth Mortgage Insurance Australia at AU$2.70 per share, while the most bearish prices it at AU$2.10. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Genworth Mortgage Insurance Australia is an easy business to forecast or the the analysts are all using similar assumptions.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Genworth Mortgage Insurance Australia's past performance and to peers in the same industry. For example, we noticed that Genworth Mortgage Insurance Australia's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 33%, well above its historical decline of 11% a year over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to decline 20% next year. So it's pretty clear that Genworth Mortgage Insurance Australia is expected to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts now expect Genworth Mortgage Insurance Australia to become profitable next year, compared to previous expectations that it would report a loss. Fortunately, they also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Genworth Mortgage Insurance Australia analysts - going out to 2024, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 1 warning sign for Genworth Mortgage Insurance Australia 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.