It's been a sad week for The Go-Ahead Group plc (LON:GOG), who've watched their investment drop 13% to UK£5.66 in the week since the company reported its full-year result. Things were not great overall, with a surprise (statutory) loss of UK£0.67 per share on revenues of UK£3.9b, even though the analysts had been expecting a profit. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
After the latest results, the consensus from Go-Ahead Group's eight analysts is for revenues of UK£3.30b in 2021, which would reflect an uncomfortable 15% decline in sales compared to the last year of performance. Earnings are expected to improve, with Go-Ahead Group forecast to report a statutory profit of UK£0.95 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of UK£3.53b and earnings per share (EPS) of UK£0.95 in 2021. The consensus seems maybe a little more pessimistic, trimming their revenue forecasts after the latest results even though there was no change to its EPS estimates.
The average price target was steady at UK£13.48even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Go-Ahead Group at UK£17.10 per share, while the most bearish prices it at UK£9.50. 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Go-Ahead Group's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 15%, a significant reduction from annual growth of 3.7% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 2.9% next year. It's pretty clear that Go-Ahead Group's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Yet - earnings are more important to the intrinsic value of the business. 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.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Go-Ahead Group going out to 2024, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Go-Ahead Group (1 shouldn't be ignored) you should be aware of.
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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