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A week ago, SPS Commerce, Inc. (NASDAQ:SPSC) came out with a strong set of third-quarter numbers that could potentially lead to a re-rate of the stock. The company beat both earnings and revenue forecasts, with revenue of US$80m, some 3.4% above estimates, and statutory earnings per share (EPS) coming in at US$0.31, 52% ahead of expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts 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 statutory forecasts to see whether the analysts have changed their mind on SPS Commerce after the latest results.
Taking into account the latest results, the most recent consensus for SPS Commerce from nine analysts is for revenues of US$338.8m in 2021 which, if met, would be a decent 12% increase on its sales over the past 12 months. Statutory earnings per share are expected to sink 10% to US$1.05 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$331.9m and earnings per share (EPS) of US$1.05 in 2021. There doesn't appear to have been a major change in sentiment following the results, other than the small lift in revenue estimates.
The analysts increased their price target 6.8% to US$89.57, perhaps signalling that higher revenues are a strong leading indicator for SPS Commerce's valuation. 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. Currently, the most bullish analyst values SPS Commerce at US$98.00 per share, while the most bearish prices it at US$80.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We can infer from the latest estimates that forecasts expect a continuation of SPS Commerce'shistorical trends, as next year's 12% revenue growth is roughly in line with 13% annual revenue growth over the past five years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 13% next year. So although SPS Commerce is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. There was also an upgrade to revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as 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.
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 SPS Commerce analysts - going out to 2022, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, 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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