Metcash Limited Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions
Metcash Limited (ASX:MTS) just released its half-yearly report and things are looking bullish. The company beat both earnings and revenue forecasts, with revenue of AU$7.1b, some 3.7% above estimates, and statutory earnings per share (EPS) coming in at AU$0.12, 27% ahead of expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
See our latest analysis for Metcash
After the latest results, the eleven analysts covering Metcash are now predicting revenues of AU$14.5b in 2021. If met, this would reflect an okay 5.1% improvement in sales compared to the last 12 months. Per-share earnings are expected to accumulate 6.9% to AU$0.24. Before this earnings report, the analysts had been forecasting revenues of AU$13.9b and earnings per share (EPS) of AU$0.20 in 2021. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a massive increase in earnings per share in particular.
It will come as no surprise to learn that the analysts have increased their price target for Metcash 9.6% to AU$3.54on the back of these upgrades. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Metcash, with the most bullish analyst valuing it at AU$4.15 and the most bearish at AU$1.94 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that Metcash's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 5.1%, well above its historical decline of 0.9% a year over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 5.1% next year. So it looks like Metcash is expected to grow at about the same rate as 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 Metcash following these results. They also upgraded their revenue forecasts, although the latest estimates suggest that Metcash will grow in line with the overall 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 Metcash going out to 2025, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 3 warning signs for Metcash (1 is a bit concerning!) that you need to be mindful 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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