Virtus Health Limited Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next
It's been a good week for Virtus Health Limited (ASX:VRT) shareholders, because the company has just released its latest half-year results, and the shares gained 6.4% to AU$4.64. Virtus Health reported AU$142m in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of AU$0.18 beat expectations, being 8.7% higher than what analysts expected. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on Virtus Health after the latest results.
See our latest analysis for Virtus Health
Taking into account the latest results, Virtus Health's four analysts currently expect revenues in 2020 to be AU$281.2m, approximately in line with the last 12 months. Statutory earnings per share are expected to reduce 7.9% to AU$0.33 in the same period. In the lead-up to this report, analysts had been modelling revenues of AU$284.4m and earnings per share (EPS) of AU$0.31 in 2020. Analysts seem to have become more bullish on the business, judging by their new earnings per share estimates.
The consensus price target was unchanged at AU$4.79, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Virtus Health, with the most bullish analyst valuing it at AU$5.05 and the most bearish at AU$4.44 per share. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
In addition, we can look to Virtus Health's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. We would highlight that sales are expected to reverse, with the forecast 0.06% revenue decline a notable change from historical growth of 3.9% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 5.3% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect Virtus Health to grow slower than 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 Virtus Health's earnings potential next year. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at AU$4.79, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Virtus Health going out to 2022, and you can see them free on our platform here.
You can also see whether Virtus Health is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.
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