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PRA Group, Inc. (NASDAQ:PRAA) investors will be delighted, with the company turning in some strong numbers with its latest results. It was overall a positive result, with revenues beating expectations by 5.4% to hit US$268m. PRA Group also reported a statutory profit of US$0.92, which was an impressive 51% above what the analysts had forecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the consensus forecast from PRA Group's five analysts is for revenues of US$1.06b in 2021, which would reflect an okay 3.0% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to reduce 2.5% to US$3.15 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$1.08b and earnings per share (EPS) of US$3.31 in 2021. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.
Althoughthe analysts have revised their earnings forecasts for next year, they've also lifted the consensus price target 19% to US$50.00, 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. The most optimistic PRA Group analyst has a price target of US$55.00 per share, while the most pessimistic values it at US$41.00. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the PRA Group's past performance and to peers in the same industry. We can infer from the latest estimates that forecasts expect a continuation of PRA Group'shistorical trends, as next year's 3.0% revenue growth is roughly in line with 2.7% annual revenue growth over the past five years. Compare this with the wider industry (in aggregate), which analyst estimates suggest will see revenues grow 8.4% next year. So it's pretty clear that PRA Group is expected to grow slower than similar companies in the same industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for PRA Group. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will 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 PRA Group. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple PRA Group analysts - going out to 2022, and you can see them free on our platform here.
Plus, you should also learn about the 2 warning signs we've spotted with PRA Group (including 1 which shouldn't be ignored) .
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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