Investors in S&W Seed Company (NASDAQ:SANW) had a good week, as its shares rose 5.0% to close at US$2.31 following the release of its first-quarter results. Revenues of US$12m crushed expectations, although expenses understandably increased with losses reaching US$0.15 per share, somewhat higher than what analysts forecast. Following the result, 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. We thought readers would find it interesting to see analysts' latest post-earnings forecasts for next year.
Taking into account the latest results, the three analysts covering S&W Seed provided consensus estimates of US$64.5m revenue in 2020, which would reflect a disturbing 33% decline on its sales over the past 12 months. Losses are expected to increase slightly, to US$0.42 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of US$64.4m and losses of US$0.27 per share in 2020. Analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a pretty serious reduction to EPS estimates.
As a result, there was no major change to the consensus price target of US$5.20, with analysts implicitly confirming that the business looks to be performing in line with expectations, despite higher forecast losses. 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 S&W Seed, with the most bullish analyst valuing it at US$6.00 and the most bearish at US$4.60 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 S&W Seed's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. These estimates imply that sales are expected to slow, with a forecast revenue decline of 33% a significant reduction from annual 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 2.9% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect S&W Seed to grow slower than the wider market.
The Bottom Line
The most obvious conclusion is that analysts made no changes to their forecasts for a loss next year. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that S&W Seed's revenues are expected to perform worse than the wider market. 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 estimates - from multiple S&W Seed analysts - going out to 2021, and you can see them free on our platform here.
You can also see whether S&W Seed is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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