Saratoga Investment Corp. (NYSE:SAR) defied analyst predictions to release its quarterly results, which were ahead of market expectations. The company beat both earnings and revenue forecasts, with revenue of US$14m, some 6.4% above estimates, and statutory earnings per share (EPS) coming in at US$1.95, 535% ahead of expectations. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the current consensus, from the six analysts covering Saratoga Investment, is for revenues of US$53.1m in 2021, which would reflect a definite 10% reduction in Saratoga Investment's sales over the past 12 months. Earnings are expected to tip over into lossmaking territory, with the analysts forecasting statutory losses of -US$1.07 per share in 2021. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$53.2m and losses of US$0.59 per share in 2021. While this year's revenue estimates held steady, there was also a loss per share expectations, suggesting the consensus has a bit of a mixed view on the stock.
Although the analysts are now forecasting higher losses, the average price target rose 7.2% to US$20.39, 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. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Saratoga Investment, with the most bullish analyst valuing it at US$27.00 and the most bearish at US$18.00 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast revenue decline of 10%, a significant reduction from annual growth of 16% 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 5.9% next year. It's pretty clear that Saratoga Investment's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Saratoga Investment. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Saratoga Investment'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.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Saratoga Investment going out to 2023, and you can see them free on our platform here..
Plus, you should also learn about the 4 warning signs we've spotted with Saratoga Investment (including 1 which is potentially serious) .
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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