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It's been a good week for SAF-Holland SE (ETR:SFQ) shareholders, because the company has just released its latest first-quarter results, and the shares gained 8.5% to €4.97. It looks like a credible result overall - although revenues of €283m were what the analysts expected, SAF-Holland surprised by delivering a (statutory) profit of €0.17 per share, an impressive 21% above what was forecast. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the current consensus, from the eleven analysts covering SAF-Holland, is for revenues of €943.8m in 2020, which would reflect a substantial 23% reduction in SAF-Holland's sales over the past 12 months. Earnings are expected to tip over into lossmaking territory, with the analysts forecasting statutory losses of -€0.065 per share in 2020. Before this latest report, the consensus had been expecting revenues of €952.2m and €0.053 per share in losses. So it's pretty clear the analysts have mixed opinions on SAF-Holland even after this update; although they reconfirmed their revenue numbers, it came at the cost of a per-share losses.
Although the analysts are now forecasting higher losses, the average price target rose 7.8% to 5.02727, which could indicate that these losses are expected to be "one-off", or are not anticipated to have a longer-term impact on the business. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on SAF-Holland, with the most bullish analyst valuing it at €7.70 and the most bearish at €3.50 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
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. We would highlight that sales are expected to reverse, with the forecast 23% revenue decline a notable change from historical growth of 6.1% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 6.0% next year. It's pretty clear that SAF-Holland's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts increased their loss per share estimates for next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that SAF-Holland's revenues are expected to perform worse 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.
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 SAF-Holland analysts - going out to 2024, and you can see them free on our platform here.
You still need to take note of risks, for example - SAF-Holland has 4 warning signs we think you should be aware of.
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