Investors in US Ecology, Inc. (NASDAQ:ECOL) had a good week, as its shares rose 6.9% to close at US$35.73 following the release of its quarterly results. It looks like a credible result overall - although revenues of US$238m were what the analysts expected, US Ecology surprised by delivering a (statutory) profit of US$0.20 per share, an impressive 38% above what was forecast. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on US Ecology after the latest results.
Taking into account the latest results, the consensus forecast from US Ecology's four analysts is for revenues of US$995.5m in 2021, which would reflect a credible 7.7% improvement in sales compared to the last 12 months. Earnings are expected to improve, with US Ecology forecast to report a statutory profit of US$1.19 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.00b and earnings per share (EPS) of US$1.11 in 2021. So the consensus seems to have become somewhat more optimistic on US Ecology's earnings potential following these results.
The consensus price target was unchanged at US$42.25, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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. Currently, the most bullish analyst values US Ecology at US$50.00 per share, while the most bearish prices it at US$36.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
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. We would highlight that US Ecology's revenue growth is expected to slow, with forecast 7.7% increase next year well below the historical 10%p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 6.3% next year. So it's pretty clear that, while US Ecology's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards US Ecology following these results. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for US Ecology 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 1 warning sign with US Ecology , and understanding this 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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