The investors in II-VI Incorporated's (NASDAQ:IIVI) will be rubbing their hands together with glee today, after the share price leapt 26% to US$57.20 in the week following its quarterly results. Revenues were US$728m, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$0.38, an impressive 143% ahead of estimates. 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 II-VI's 17 analysts is for revenues of US$3.03b in 2021, which would reflect a meaningful 9.6% improvement in sales compared to the last 12 months. Per-share earnings are expected to shoot up 3,428% to US$1.95. Before this earnings report, the analysts had been forecasting revenues of US$2.99b and earnings per share (EPS) of US$1.37 in 2021. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the massive increase in earnings per share expectations following these results.
The consensus price target rose 19% to US$65.46, suggesting that higher earnings estimates flow through to the stock's valuation as well. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values II-VI at US$86.00 per share, while the most bearish prices it at US$47.00. 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.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that II-VI's revenue growth is expected to slow, with forecast 9.6% increase next year well below the historical 24%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 7.6% next year. Even after the forecast slowdown in growth, it seems obvious that II-VI is also expected to grow faster than the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards II-VI following these results. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster 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 forecasts for II-VI going out to 2023, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 5 warning signs for II-VI you should be aware of, and 2 of them shouldn't be ignored.
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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