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Shareholders of Richelieu Hardware Ltd. (TSE:RCH) will be pleased this week, given that the stock price is up 12% to CA$38.55 following its latest annual results. The result was positive overall - although revenues of CA$1.1b were in line with what the analysts predicted, Richelieu Hardware surprised by delivering a statutory profit of CA$1.50 per share, modestly greater than expected. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the most recent consensus for Richelieu Hardware from dual analysts is for revenues of CA$1.25b in 2021 which, if met, would be a solid 11% increase on its sales over the past 12 months. Per-share earnings are expected to rise 9.9% to CA$1.66. In the lead-up to this report, the analysts had been modelling revenues of CA$1.19b and earnings per share (EPS) of CA$1.49 in 2021. So it seems there's been a definite increase in optimism about Richelieu Hardware's future following the latest results, with a solid gain to the earnings per share forecasts in particular.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 5.5% to CA$38.25per share.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that Richelieu Hardware's rate of growth is expected to accelerate meaningfully, with the forecast 11% revenue growth noticeably faster than its historical growth of 7.1%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 6.8% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Richelieu Hardware is expected to grow much faster than its industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Richelieu Hardware's earnings potential next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At least one analyst has provided forecasts out to 2022, which can be seen for free on our platform here.
We also provide an overview of the Richelieu Hardware Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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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