Simulations Plus, Inc. (NASDAQ:SLP) defied analyst predictions to release its first-quarter results, which were ahead of market expectations. The company beat expectations with revenues of US$9.4m arriving 9.2% ahead of forecasts. Statutory earnings per share (EPS) were US$0.11, 10.0% ahead of estimates. 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 current consensus from Simulations Plus's dual analysts is for revenues of US$39.7m in 2020, which would reflect a decent 11% increase on its sales over the past 12 months. Statutory earnings per share are expected to accumulate 4.0% to US$0.54. Before this earnings report, analysts had been forecasting revenues of US$39.1m and earnings per share (EPS) of US$0.54 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
With analysts reconfirming their revenue and earnings forecasts, it's surprising to see that the price target rose 6.8% to US$39.50. It looks as though analysts previously had some doubts over whether the business would live up to their expectations.
Further, we can compare these estimates to past performance, and see how Simulations Plus forecasts compare to the wider market's forecast performance. It's pretty clear that analysts expect Simulations Plus's revenue growth will slow down substantially, with revenues next year expected to grow 11%, compared to a historical growth rate of 18% over the past five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 14% next year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Simulations Plus 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. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Simulations Plus's revenues are expected to perform worse than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for Simulations Plus going out as far as 2024, and you can see them free on our platform here.
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