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It's been a good week for Hercules Capital, Inc. (NYSE:HTGC) shareholders, because the company has just released its latest full-year results, and the shares gained 3.0% to US$15.85. It looks like a credible result overall - although revenues of US$287m were what the analysts expected, Hercules Capital surprised by delivering a (statutory) profit of US$2.01 per share, an impressive 99% above what was forecast. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Hercules Capital after the latest results.
Following last week's earnings report, Hercules Capital's ten analysts are forecasting 2021 revenues to be US$290.9m, approximately in line with the last 12 months. Statutory earnings per share are forecast to crater 34% to US$1.32 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$297.9m and earnings per share (EPS) of US$1.35 in 2021. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the small dip in earnings per share expectations.
The average price target climbed 11% to US$16.33despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes. 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 Hercules Capital at US$17.50 per share, while the most bearish prices it at US$14.50. This is a very narrow spread of estimates, implying either that Hercules Capital is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
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. It's pretty clear that there is an expectation that Hercules Capital's revenue growth will slow down substantially, with revenues next year expected to grow 1.3%, compared to a historical growth rate of 13% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 4.2% next year. Factoring in the forecast slowdown in growth, it seems obvious that Hercules Capital is also expected to grow slower than other industry participants.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Hercules Capital. 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. 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. At Simply Wall St, we have a full range of analyst estimates for Hercules Capital going out to 2022, and you can see them free on our platform here..
However, before you get too enthused, we've discovered 5 warning signs for Hercules Capital (2 are a bit concerning!) 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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