Shareholders of Exchange Income Corporation (TSE:EIF) will be pleased this week, given that the stock price is up 10% to CA$36.35 following its latest quarterly results. Revenues of CA$297m fell slightly short of expectations, but earnings were a definite bright spot, with statutory per-share profits of CA$0.49 an impressive 92% ahead of estimates. The 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 statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the consensus forecast from Exchange Income's nine analysts is for revenues of CA$1.38b in 2021, which would reflect a decent 14% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to bounce 141% to CA$2.77. Before this earnings report, the analysts had been forecasting revenues of CA$1.42b and earnings per share (EPS) of CA$2.56 in 2021. So it's pretty clear that while sentiment around revenues has declined following the latest results, the analysts are now more bullish on the company's earnings power.
There's been no real change to the average price target of CA$39.65, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company's valuation over a longer timeframe. 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. Currently, the most bullish analyst values Exchange Income at CA$46.00 per share, while the most bearish prices it at CA$32.00. 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. The analysts are definitely expecting Exchange Income's growth to accelerate, with the forecast 14% growth ranking favourably alongside historical growth of 11% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 26% per year. So it's clear that despite the acceleration in growth, Exchange Income is expected to grow meaningfully slower than the industry average.
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 Exchange Income following these results. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Even so, long term profitability is more important for the value creation process. The consensus price target held steady at CA$39.65, 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 Exchange Income analysts - going out to 2022, and you can see them free on our platform here.
Plus, you should also learn about the 4 warning signs we've spotted with Exchange Income (including 2 which can'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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