Analysts might have been a bit too bullish on IPL Plastics Inc. (TSE:IPLP), given that the company fell short of expectations when it released its yearly results last week. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at US$605m, statutory earnings missed forecasts by an incredible 33%, coming in at just US$0.25 per share. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
After the latest results, the ten analysts covering IPL Plastics are now predicting revenues of US$643.1m in 2020. If met, this would reflect a modest 6.3% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to jump 72% to US$0.44. Before this earnings report, analysts had been forecasting revenues of US$678.1m and earnings per share (EPS) of US$0.52 in 2020. From this we can that analyst sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a real cut to earnings per share estimates.
It'll come as no surprise then, to learn that analysts have cut their price target 21% to US$7.19. 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. There are some variant perceptions on IPL Plastics, with the most bullish analyst valuing it at US$8.74 and the most bearish at US$5.46 per share. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. It's pretty clear that analysts expect IPL Plastics's revenue growth will slow down substantially, with revenues next year expected to grow 6.3%, compared to a historical growth rate of 18% over the past five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 1.4% next year. So it's pretty clear that, while IPL Plastics'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 IPL Plastics. Unfortunately analysts also downgraded their revenue estimates, although industry data suggests that IPL Plastics's revenues are expected to grow faster than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of IPL Plastics's future valuation.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple IPL Plastics analysts - going out to 2021, and you can see them free on our platform here.
You can also view our analysis of IPL Plastics's balance sheet, and whether we think IPL Plastics is carrying too much debt, for free 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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