One of the biggest stories of last week was how Wagners Holding Company Limited (ASX:WGN) shares plunged 24% in the week since its latest half-yearly results, closing yesterday at AU$1.43. Revenues came in well ahead of expectations at AU$122m, although statutory earnings per share fell badly short. Wagners Holding reported a loss of AU$0.007 per share, whereas analysts had previously expected a profit. 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 (statutory) post-earnings forecasts for next year.
Following last week's earnings report, Wagners Holding's five analysts are forecasting 2020 revenues to be AU$238.4m, approximately in line with the last 12 months. Statutory earnings per share are expected to nosedive 26% to AU$0.021 in the same period. In the lead-up to this report, analysts had been modelling revenues of AU$235.8m and earnings per share (EPS) of AU$0.07 in 2020. So there's definitely been a decline in analyst sentiment after the latest results, noting the large cut to new EPS forecasts.
It might be a surprise to learn that the consensus price target fell 15% to AU$1.96, with analysts clearly linking lower forecast earnings to the performance of the stock price. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Wagners Holding, with the most bullish analyst valuing it at AU$3.16 and the most bearish at AU$1.35 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that Wagners Holding's rate of growth is expected to accelerate meaningfully, with forecast 1.3% revenue growth noticeably faster than its historical growth of 0.6%p.a. over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 5.5% per year. So it's clear that despite the acceleration in growth, Wagners Holding is expected to grow meaningfully slower than the market average.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Wagners Holding's revenues are expected to perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Wagners Holding's future valuation.
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 Wagners Holding analysts - going out to 2022, and you can see them free on our platform here.
You can also see whether Wagners Holding 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 email@example.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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