Analysts might have been a bit too bullish on HUB24 Limited (ASX:HUB), given that the company fell short of expectations when it released its half-yearly results last week. Results look to have been somewhat negative - revenue fell 3.8% short of analyst estimates at AU$53m, and statutory earnings of AU$0.094 per share missed forecasts by 9.5%. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on HUB24 after the latest results.
After the latest results, the seven analysts covering HUB24 are now predicting revenues of AU$110.0m in 2020. If met, this would reflect a credible 7.0% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to jump 27% to AU$0.20. In the lead-up to this report, analysts had been modelling revenues of AU$115.5m and earnings per share (EPS) of AU$0.22 in 2020. Analysts are less bullish than they were before these results, given the reduced revenue forecasts and the small dip in earnings per share expectations.
Despite the cuts to forecast earnings, there was no real change to the AU$12.74 price target, showing that analysts don't think the changes have a meaningful impact on the stock's intrinsic value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values HUB24 at AU$15.46 per share, while the most bearish prices it at AU$8.72. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Further, we can compare these estimates to past performance, and see how HUB24 forecasts compare to the wider market's forecast performance. It's pretty clear that analysts expect HUB24's revenue growth will slow down substantially, with revenues next year expected to grow 7.0%, compared to a historical growth rate of 28% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 5.5% next year. So it's pretty clear that, while HUB24's revenue growth is expected to slow, it's still expected to grow faster than the market itself.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for HUB24. Unfortunately analysts also downgraded their revenue estimates, although industry data suggests that HUB24's revenues are expected to grow faster than the wider market. The consensus price target held steady at AU$12.74, 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 HUB24. Long-term earnings power is much more important than next year's profits. We have forecasts for HUB24 going out to 2024, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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