Perenti Global Limited (ASX:PRN) Just Released Its Half-Year Results And Analysts Are Updating Their Estimates
One of the biggest stories of last week was how Perenti Global Limited (ASX:PRN) shares plunged 22% in the week since its latest interim results, closing yesterday at AU$1.18. It was an okay report, and revenues came in at AU$1.0b, approximately in line with analyst estimates leading up to the results announcement. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Check out our latest analysis for Perenti Global
Taking into account the latest results, Perenti Global's six analysts currently expect revenues in 2021 to be AU$2.06b, approximately in line with the last 12 months. Earnings are expected to improve, with Perenti Global forecast to report a statutory profit of AU$0.13 per share. In the lead-up to this report, the analysts had been modelling revenues of AU$2.09b and earnings per share (EPS) of AU$0.14 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 minor downgrade to their earnings per share forecasts.
The consensus price target held steady at AU$1.63, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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 Perenti Global at AU$1.98 per share, while the most bearish prices it at AU$1.33. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 1.8%, a significant reduction from annual growth of 28% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 3.3% next year. The forecasts do look comparatively optimistic for Perenti Global, since they're expecting it to shrink 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, they also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations. Their estimates also suggest that Perenti Global's revenues are expected to perform better than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
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 estimates - from multiple Perenti Global analysts - going out to 2023, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 4 warning signs for Perenti Global (1 can't be ignored) you should be aware 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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