As you might know, Benefitfocus, Inc. (NASDAQ:BNFT) just kicked off its latest third-quarter results with some very strong numbers. Revenues and losses per share were both better than expected, with revenues of US$64m leading estimates by 4.2%. Statutory losses were smaller than the analystsexpected, coming in at US$0.19 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, Benefitfocus' seven analysts currently expect revenues in 2021 to be US$283.8m, approximately in line with the last 12 months. Losses are predicted to fall substantially, shrinking 39% to US$0.62. Before this earnings announcement, the analysts had been modelling revenues of US$289.5m and losses of US$0.72 per share in 2021. While the revenue estimates were largely unchanged, sentiment seems to have improved, with the analysts upgrading revenues and making a losses per share in particular.
The consensus price target fell 12% to US$16.83despite the forecast for smaller losses next year. It looks like the ongoing lack of profitability is starting to weigh on valuations. 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. Currently, the most bullish analyst values Benefitfocus at US$29.00 per share, while the most bearish prices it at US$12.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. 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.
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 would highlight that Benefitfocus' revenue growth is expected to slow, with forecast 1.7% increase next year well below the historical 8.8%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 13% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Benefitfocus.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Benefitfocus' future valuation.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Benefitfocus going out to 2024, and you can see them free on our platform here..
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Benefitfocus , and understanding these should be part of your investment process.
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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