Investors in Premier Foods plc (LON:PFD) had a good week, as its shares rose 3.9% to close at UK£0.80 following the release of its annual results. It was an okay report, and revenues came in at UK£847m, approximately in line with analyst estimates leading up to the results announcement. The 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the consensus forecast from Premier Foods' four analysts is for revenues of UK£892.3m in 2021, which would reflect a credible 5.3% improvement in sales compared to the last 12 months. Per-share earnings are expected to jump 27% to UK£0.07. Prior to the latest earnings, the analysts were forecasting revenues of UK£893.5m in 2021, and did not provide an earnings per share estimate. It looks like the analysts are starting to apply closer scrutiny to Premier Foods following these results. While they haven't made any changes to their revenue estimates, they began providing an earnings forecast for next year.
The consensus price target rose 8.2% to UK£0.92, suggesting that higher earnings estimates flow through to the stock's valuation as well. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Premier Foods at UK£1.00 per share, while the most bearish prices it at UK£0.86. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Premier Foods is an easy business to forecast or the the analysts are all using similar assumptions.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that Premier Foods' rate of growth is expected to accelerate meaningfully, with the forecast 5.3% revenue growth noticeably faster than its historical growth of 2.1%p.a. over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 4.8% per year. Premier Foods is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.
The Bottom Line
The biggest takeaway for us from these new estimates is the bullish forecast for profits next year. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. We note an upgrade to the price target, suggesting that the analysts believes 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. At Simply Wall St, we have a full range of analyst estimates for Premier Foods going out to 2024, and you can see them free on our platform here..
We don't want to rain on the parade too much, but we did also find 1 warning sign for Premier Foods that you need to be mindful of.
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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