Motorcar Parts of America, Inc. (NASDAQ:MPAA) last week reported its latest second-quarter results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. It was a pretty mixed result, with revenues beating expectations to hit US$151m. Earnings fell 8.6% short of analyst forecasts, reaching US$0.32 per share. Following the result, 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. So we gathered the latest post-earnings forecasts to see what analysts are forecasting for next year.
Taking into account the latest results, the current consensus from Motorcar Parts of America's four analysts is for revenues of US$557.7m in 2020, which would reflect a meaningful 8.8% increase on its sales over the past 12 months. Earnings are expected to improve, with Motorcar Parts of America forecast to report a profit of US$0.99 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of US$555.7m and earnings per share (EPS) of US$1.19 in 2020. So there's definitely been a decline in analyst sentiment after the latest results, noting the substantial drop in new EPS forecasts.
The average analyst price target fell 22% to US$26.00, with reduced earnings forecasts clearly tied to a lower valuation estimate. 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. The most optimistic Motorcar Parts of America analyst has a price target of US$39.00 per share, while the most pessimistic values it at US$17.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. Next year brings more of the same, according to analysts, with revenue forecast to grow 8.8%, in line with its 10% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 5.3% per year. So it's pretty clear that Motorcar Parts of America is forecast to grow substantially faster than its market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business 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 Motorcar Parts of America's future valuation.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Motorcar Parts of America analysts - going out to 2022, and you can see them free on our platform here.
It might also be worth considering whether Motorcar Parts of America's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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