Stuart Olson Inc. (TSE:SOX) just released its latest full-year report and things are not looking great. Revenues missed expectations somewhat, coming in at CA$929m, but statutory earnings fell catastrophically short, with a loss of CA$5.82 some 1637% larger than what the analysts had predicted. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following last week's earnings report, Stuart Olson's five analysts are forecasting 2020 revenues to be CA$938.7m, approximately in line with the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 96% to CA$0.24. Yet prior to the latest earnings, the analysts had been forecasting revenues of CA$983.4m and losses of CA$0.14 per share in 2020. So it's pretty clear the analysts have mixed opinions on Stuart Olson after this update; revenues were downgraded and per-share losses expected to increase.
The consensus price target fell 9.0% to CA$1.53, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Stuart Olson analyst has a price target of CA$2.00 per share, while the most pessimistic values it at CA$0.20. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. From these estimates it looks as though the analysts expect the years of declining sales to come to an end, given the flat revenue forecast for next year. That would be a definite improvement, given that the past five years have seen sales shrink five years annually. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue shrink 2.5% per year. Not only are Stuart Olson's revenues expected to improve, it seems that the analysts are also expecting it to grow faster 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 Stuart Olson. Unfortunately, they also downgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on Stuart Olson. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Stuart Olson analysts - going out to 2021, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 4 warning signs for Stuart Olson (1 doesn't sit too well with us) you should be aware of.
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