Noodles & Company (NASDAQ:NDLS) shareholders are probably feeling a little disappointed, since its shares fell 2.6% to US$9.44 in the week after its latest annual results. It was a pretty bad result overall; while revenues were in line with expectations at US$394m, statutory losses exploded to US$0.53 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. 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 Noodles' five analysts is for revenues of US$456.0m in 2021, which would reflect a notable 16% improvement in sales compared to the last 12 months. Earnings are expected to improve, with Noodles forecast to report a statutory profit of US$0.25 per share. Before this earnings report, the analysts had been forecasting revenues of US$463.2m and earnings per share (EPS) of US$0.26 in 2021. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a small dip in their earnings per share forecasts.
Althoughthe analysts have revised their earnings forecasts for next year, they've also lifted the consensus price target 19% to US$11.40, suggesting the revised estimates are not indicative of a weaker long-term future for the business. 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 Noodles at US$13.00 per share, while the most bearish prices it at US$9.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Noodles shareholders.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Noodles' past performance and to peers in the same industry. One thing stands out from these estimates, which is that Noodles is forecast to grow faster in the future than it has in the past, with revenues expected to grow 16%. If achieved, this would be a much better result than the 2.5% annual decline 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 revenue grow 24% per year. So although Noodles' revenue growth is expected to improve, it is still expected to grow slower than the industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Noodles' revenues are expected to perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn't be too quick to come to a conclusion on Noodles. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Noodles going out to 2022, and you can see them free on our platform here..
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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