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It's been a mediocre week for Graham Corporation (NYSE:GHM) shareholders, with the stock dropping 13% to US$14.76 in the week since its latest third-quarter results. It was a workmanlike result, with revenues of US$27m coming in 7.5% ahead of expectations, and statutory earnings per share of US$0.11, in line with analyst appraisals. The 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following the latest results, Graham's three analysts are now forecasting revenues of US$107.0m in 2022. This would be a decent 13% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to soar 52% to US$0.55. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$105.9m and earnings per share (EPS) of US$0.54 in 2022. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
The analysts reconfirmed their price target of US$22.67, showing that the business is executing well and in line with expectations. 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. There are some variant perceptions on Graham, with the most bullish analyst valuing it at US$27.00 and the most bearish at US$19.00 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Graham shareholders.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. For example, we noticed that Graham's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 13%, well above its historical decline of 0.1% 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 grow 7.5% next year. Not only are Graham's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. The consensus price target held steady at US$22.67, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Graham. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Graham going out to 2023, and you can see them free on our platform here..
Even so, be aware that Graham is showing 1 warning sign in our investment analysis , you should know about...
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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