The full-year results for The Sage Group plc (LON:SGE) were released last week, making it a good time to revisit its performance. It looks like the results were a bit of a negative overall. While revenues of UK£1.9b were in line with analyst predictions, earnings were less than expected, missing estimates by 9.2% to hit UK£0.24 per share. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest forecasts to see whether analysts have changed their mind on Sage Group after the latest results.
Following last week's earnings report, Sage Group's ten analysts are forecasting 2020 revenues to be UK£1.94b, approximately in line with the last 12 months. Earnings per share are expected to climb 18% to UK£0.29. Yet prior to the latest earnings, analysts had been forecasting revenues of UK£2.06b and earnings per share (EPS) of UK£0.29 in 2020. So it looks like analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is expected to maintain EPS.
The consensus has reconfirmed its price target of UK£6.84, showing that analysts don't expect weaker sales expectations next year to have a material impact on Sage Group's market value. 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. The most optimistic Sage Group analyst has a price target of UK£9.50 per share, while the most pessimistic values it at UK£5.75. 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.
Further, we can compare these estimates to past performance, and see how Sage Group forecasts compare to the wider market's forecast performance. It's pretty clear that analysts expect Sage Group's revenue growth will slow down substantially, with revenues next year expected to grow 0.1%, compared to a historical growth rate of 8.1% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 7.0% per year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Sage Group to grow slower than the wider market.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. Still, earnings are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Sage Group analysts - going out to 2022, and you can see them free on our platform here.
You can also view our analysis of Sage Group's balance sheet, and whether we think Sage Group is carrying too much debt, for free on our platform here.
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