GUD Holdings Limited (ASX:GUD) last week reported its latest full-year results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Revenues were in line with forecasts, at AU$438m, although statutory earnings per share came in 18% below what the analysts expected, at AU$0.50 per share. 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've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the consensus forecast from GUD Holdings' six analysts is for revenues of AU$453.5m in 2021, which would reflect a modest 3.5% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to surge 23% to AU$0.62. Yet prior to the latest earnings, the analysts had been anticipated revenues of AU$449.9m and earnings per share (EPS) of AU$0.65 in 2021. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a small dip in their earnings per share forecasts.
Despite cutting their earnings forecasts,the analysts have lifted their price target 12% to AU$11.70, suggesting that these impacts are not expected to weigh on the stock's value in the long term. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic GUD Holdings analyst has a price target of AU$14.20 per share, while the most pessimistic values it at AU$10.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting GUD Holdings' growth to accelerate, with the forecast 3.5% growth ranking favourably alongside historical growth of 0.1% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 9.9% per year. It seems obvious that, while the future growth outlook is brighter than the recent past, GUD Holdings is expected to grow slower than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for GUD Holdings. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse 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.
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 GUD Holdings analysts - going out to 2023, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 3 warning signs for GUD Holdings 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.
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