It's shaping up to be a tough period for Recipe Unlimited Corporation (TSE:RECP), which a week ago released some disappointing third-quarter results that could have a notable impact on how the market views the stock. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at CA$309m, earnings missed forecasts by an incredible 69%, coming in at just CA$0.11 per share. 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 forecasts to see whether analysts have changed their earnings models, following these results.
Following last week's earnings report, Recipe Unlimited's three analysts are forecasting 2020 revenues to be CA$1.28b, approximately in line with the last 12 months. Earnings per share are expected to leap 67% to CA$1.50. Yet prior to the latest earnings, analysts had been forecasting revenues of CA$1.30b and earnings per share (EPS) of CA$1.53 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
With no major changes to earnings forecasts, the consensus price target fell 7.2% to CA$28.40, suggesting that analysts might have previously been hoping for an earnings upgrade. 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. The most optimistic Recipe Unlimited analyst has a price target of CA$35.00 per share, while the most pessimistic values it at CA$23.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. We would highlight that Recipe Unlimited's revenue growth is expected to slow, with forecast 1.9% increase next year well below the historical 36%p.a. growth over the last five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 7.4% per year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Recipe Unlimited to grow slower than the wider market.
The Bottom Line
The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Recipe Unlimited's revenues are expected to perform worse 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 Recipe Unlimited's future valuation.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Recipe Unlimited going out to 2020, and you can see them free on our platform here.
You can also view our analysis of Recipe Unlimited's balance sheet, and whether we think Recipe Unlimited is carrying too much debt, for free on our platform here.
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