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GUD Holdings Limited Just Missed EPS By 7.6%: Here's What Analysts Think Will Happen Next

Simply Wall St

Investors in GUD Holdings Limited (ASX:GUD) had a good week, as its shares rose 4.7% to close at AU$12.02 following the release of its interim results. It looks like the results were a bit of a negative overall. While revenues of AU$227m were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 7.6% to hit AU$0.30 per share. Following the result, 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. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.

See our latest analysis for GUD Holdings

ASX:GUD Past and Future Earnings, February 1st 2020

Taking into account the latest results, the current consensus from GUD Holdings's seven analysts is for revenues of AU$455.1m in 2020, which would reflect a reasonable 3.1% increase on its sales over the past 12 months. Statutory per share are forecast to be AU$0.65, approximately in line with the last 12 months. Before this earnings report, analysts had been forecasting revenues of AU$449.4m and earnings per share (EPS) of AU$0.69 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share forecasts for next year.

Despite cutting their earnings forecasts, analysts have lifted their price target 5.2% to AU$11.28, 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$12.50 per share, while the most pessimistic values it at AU$10.00. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.

It can also be useful to step back and take a broader view of how analyst forecasts compare to GUD Holdings's performance in recent years. One thing stands out from these estimates, which is that analysts are forecasting GUD Holdings to grow faster in the future than it has in the past, with revenues expected to grow 3.1%. If achieved, this would be a much better result than the 5.3% annual decline over the past five years. Compare this against analyst estimates for the wider market, which suggest that (in aggregate) market revenues are expected to grow 5.9% next year. So although GUD Holdings's revenue growth is expected to improve, it is still expected to grow slower than the market.

The Bottom Line

The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that GUD Holdings's revenues are expected to perform worse than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for GUD Holdings going out to 2022, and you can see them free on our platform here.

It might also be worth considering whether GUD Holdings's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.