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SThree plc Analysts Are Cutting Their Estimates: Here's What You Need To Know

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Simply Wall St
·4 min read
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It's been a good week for SThree plc (LON:STEM) shareholders, because the company has just released its latest annual results, and the shares gained 2.5% to UK£3.65. Revenues of UK£1.3b were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at UK£0.31, missing estimates by 3.2%. 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. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.

See our latest analysis for SThree

LSE:STEM Past and Future Earnings, January 30th 2020
LSE:STEM Past and Future Earnings, January 30th 2020

Following last week's earnings report, SThree's seven analysts are forecasting 2020 revenues to be UK£1.34b, approximately in line with the last 12 months. Statutory per share are forecast to be UK£0.32, approximately in line with the last 12 months. Yet prior to the latest earnings, analysts had been forecasting revenues of UK£1.42b and earnings per share (EPS) of UK£0.34 in 2020. Analysts are less bullish than they were before these results, given the reduced revenue forecasts and the small dip in earnings per share expectations.

Despite the cuts to forecast earnings, there was no real change to the UK£4.01 price target, showing that analysts don't think the changes have a meaningful impact on the stock's intrinsic value. 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. The most optimistic SThree analyst has a price target of UK£4.80 per share, while the most pessimistic values it at UK£3.55. 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 SThree forecasts compare to the wider market's forecast performance. We would highlight that sales are expected to reverse, with the forecast 0.7% revenue decline a notable change from historical growth of 12% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 4.9% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect SThree to grow slower than the wider market.

The Bottom Line

The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for SThree. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. 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 in mind, we wouldn't be too quick to come to a conclusion on SThree. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for SThree going out to 2022, and you can see them free on our platform here..

You can also see our analysis of SThree's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.