Investors in Smith & Wesson Brands, Inc. (NASDAQ:SWBI) had a good week, as its shares rose 7.5% to close at US$17.70 following the release of its full-year results. The results don't look great, especially considering that statutory losses grew 4062% toUS$1.11 per share. Revenues of US$678m did beat expectations by 2.1%, but it looks like a bit of a cold comfort. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the consensus forecast from Smith & Wesson Brands' four analysts is for revenues of US$830.8m in 2021, which would reflect a huge 22% improvement in sales compared to the last 12 months. Smith & Wesson Brands is also expected to turn profitable, with statutory earnings of US$1.28 per share. Before this earnings report, the analysts had been forecasting revenues of US$814.6m and earnings per share (EPS) of US$0.85 in 2021. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the considerable lift to earnings per share expectations following these results.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 14% to US$22.00. 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. There are some variant perceptions on Smith & Wesson Brands, with the most bullish analyst valuing it at US$24.00 and the most bearish at US$18.00 per share. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
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. For example, we noticed that Smith & Wesson Brands' rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 22%, well above its historical decline of 1.8% a year over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 14% next year. So it looks like Smith & Wesson Brands is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Smith & Wesson Brands' earnings potential next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Smith & Wesson Brands going out to 2022, and you can see them free on our platform here.
Before you take the next step you should know about the 3 warning signs for Smith & Wesson Brands (2 are a bit unpleasant!) that we have uncovered.
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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. Thank you for reading.