The quarterly results for Golden Entertainment, Inc. (NASDAQ:GDEN) were released last week, making it a good time to revisit its performance. Revenues were in line with expectations, at US$207m, while statutory losses ballooned to US$1.17 per share. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the consensus from Golden Entertainment's five analysts is for revenues of US$617.8m in 2020, which would reflect a painful 34% decline in sales compared to the last year of performance. Losses are forecast to balloon 123% to US$5.14 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$788.9m and losses of US$2.59 per share in 2020. There's been a definite change in sentiment in this update, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.
The average price target fell 27% to US$12.80, implicitly signalling that lower earnings per share are a leading indicator for Golden Entertainment's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Golden Entertainment, with the most bullish analyst valuing it at US$15.00 and the most bearish at US$11.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Golden Entertainment's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 34% revenue decline a notable change from historical growth of 37% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 13% next year. It's pretty clear that Golden Entertainment's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts increased their loss per share estimates for next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Golden Entertainment's future valuation.
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 estimates - from multiple Golden Entertainment analysts - going out to 2022, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 2 warning signs for Golden Entertainment that you need to be mindful of.
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