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Renewi plc Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

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Renewi plc (LON:RWI) just released its annual report and things are looking bullish. Results were good overall, with revenues beating analyst predictions by 3.5% to hit €1.9b. Statutory earnings per share (EPS) came in at €0.94, some 8.7% above whatthe analysts had expected. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Renewi after the latest results.

Check out our latest analysis for Renewi

earnings-and-revenue-growth
earnings-and-revenue-growth

Taking into account the latest results, the most recent consensus for Renewi from five analysts is for revenues of €1.94b in 2023 which, if met, would be a satisfactory 3.7% increase on its sales over the past 12 months. Statutory earnings per share are forecast to reduce 8.4% to €0.85 in the same period. Before this earnings report, the analysts had been forecasting revenues of €1.88b and earnings per share (EPS) of €0.66 in 2023. So it seems there's been a definite increase in optimism about Renewi's future following the latest results, with a massive increase in the earnings per share forecasts in particular.

Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of UK£10.36, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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. There are some variant perceptions on Renewi, with the most bullish analyst valuing it at UK£11.00 and the most bearish at UK£9.50 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Renewi is an easy business to forecast or the the analysts are all using similar assumptions.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Renewi's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 3.7% growth on an annualised basis. This is compared to a historical growth rate of 6.1% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 7.3% annually. Factoring in the forecast slowdown in growth, it seems obvious that Renewi is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Renewi following these results. Fortunately, they also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider industry. The consensus price target held steady at UK£10.36, with the latest estimates not enough to have an impact on their price targets.

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 Renewi analysts - going out to 2025, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Renewi (1 is potentially serious) you should be aware of.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.