It's been a mediocre week for TopBuild Corp. (NYSE:BLD) shareholders, with the stock dropping 12% to US$109 in the week since its latest yearly results. It was a credible result overall, with revenues of US$2.6b and statutory earnings per share of US$5.56 both in line with analyst estimates, showing that TopBuild is executing in line with expectations. 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. With this in mind, we've gathered the latest statutory forecasts to see what analysts are expecting for next year.
After the latest results, the nine analysts covering TopBuild are now predicting revenues of US$2.80b in 2020. If met, this would reflect a modest 6.8% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to ascend 16% to US$6.55. In the lead-up to this report, analysts had been modelling revenues of US$2.80b and earnings per share (EPS) of US$6.30 in 2020. So the consensus seems to have become somewhat more optimistic on TopBuild's earnings potential following these results.
Analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 7.1% to US$128. 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. The most optimistic TopBuild analyst has a price target of US$135 per share, while the most pessimistic values it at US$115. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. We would highlight that TopBuild's revenue growth is expected to slow, with forecast 6.8% increase next year well below the historical 12%p.a. growth over the last five years. Compare this to the other companies in this market with analyst coverage, which are forecast to grow their revenue at 5.5% per year. Factoring in the forecast slowdown in growth, it looks like analysts are expecting TopBuild to grow at about the same rate as the wider market.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around TopBuild's earnings potential next year. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as 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.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for TopBuild going out to 2022, and you can see them free on our platform here.
It might also be worth considering whether TopBuild's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.