Renew Holdings plc (LON:RNWH) last week reported its latest full-year results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Revenues of UK£600m were in line with forecasts, although earnings per share (EPS) came in below expectations at UK£0.29, missing estimates by 2.8%. 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. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.
Taking into account the latest results, the most recent consensus for Renew Holdings from six analysts is for revenues of UK£634.7m in 2020, which is a reasonable 5.8% increase on its sales over the past 12 months. Earnings per share are expected to shoot up 32% to UK£0.39. Yet prior to the latest earnings, analysts had been forecasting revenues of UK£616.6m and earnings per share (EPS) of UK£0.37 in 2020. It looks like there's been a modest increase in sentiment following the latest results, with analysts becoming a bit more optimistic in their predictions for both revenues and earnings.
Although analysts have upgraded their earnings estimates, there was no change to the consensus price target of UK£4.79, suggesting that the forecast performance does not have a long term impact on the company's valuation That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Renew Holdings, with the most bullish analyst valuing it at UK£5.93 and the most bearish at UK£3.80 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
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. It's clear from the latest estimates that Renew Holdings's rate of growth is expected to accelerate meaningfully, with forecast 5.8% revenue growth noticeably faster than its historical growth of 3.4%p.a. over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 3.6% next year. It seems obvious that, while the growth outlook is brighter than the recent past, analysts also expect Renew Holdings to grow faster than the wider market.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around Renew Holdings's earnings potential next year. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider market. The consensus price target held steady at UK£4.79, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that in mind, we wouldn't be too quick to come to a conclusion on Renew Holdings. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Renew Holdings analysts - going out to 2022, and you can see them free on our platform here.
It might also be worth considering whether Renew Holdings's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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