Investors in CLS Holdings plc (LON:CLI) had a good week, as its shares rose 3.7% to close at UK£2.55 following the release of its annual results. It was an okay result overall, with revenues coming in at UK£138m, roughly what analysts had been expecting. 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 analysts' statutory forecasts suggest is in store for next year.
Taking into account the latest results, the most recent consensus for CLS Holdings from lone analyst is for revenues of UK£148.0m in 2020, which is a modest 7.0% increase on its sales over the past 12 months. Statutory earnings per share are expected to fall 13% to UK£0.29 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of UK£151.0m and earnings per share (EPS) of UK£0.12 in 2020. There was no real change to the revenue estimates, but analysts do seem more bullish on earnings, given the considerable lift to earnings per share expectations following these results.
There's been no major changes to the consensus price target of UK£3.12, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the CLS Holdings's past performance and to peers in the same market. Analysts are definitely expecting CLS Holdings's growth to accelerate, with the forecast 7.0% growth ranking favourably alongside historical growth of 5.2% per annum over the past five years. Compare this with other companies in the same market, which are forecast to see a revenue decline of 3.9% next year. So it's clear with the acceleration in growth, CLS Holdings is expected to grow meaningfully faster than the wider market.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards CLS Holdings following these results. The consensus also reconfirmed their revenue estimates, suggesting that sales are performing in line with expectations. Plus, our data suggests that CLS Holdings is expected to grow faster than the wider market. The consensus price target held steady at UK£3.12, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that in mind, we wouldn't be too quick to come to a conclusion on CLS Holdings. Long-term earnings power is much more important than next year's profits. At least one analyst has provided forecasts out to 2023, which can be seen for free on our platform here.
You can also view our analysis of CLS Holdings's balance sheet, and whether we think CLS Holdings is carrying too much debt, for free on our platform here.
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