Last week saw the newest half-year earnings release from Capgemini SE (EPA:CAP), an important milestone in the company’s journey to build a stronger business. Results were roughly in line with estimates, with revenues of €7.6b and statutory earnings per share of €5.00. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the most recent consensus for Capgemini from 18 analysts is for revenues of €15.9b in 2020 which, if met, would be a satisfactory 8.0% increase on its sales over the past 12 months. Statutory per share are forecast to be €4.65, approximately in line with the last 12 months. Before this earnings report, the analysts had been forecasting revenues of €15.8b and earnings per share (EPS) of €4.69 in 2020. The consensus analysts don’t seem to have seen anything in these results that would have changed their view on the business, given there’s been no major change to their estimates.
The consensus price target rose 11% to €130despite there being no meaningful change to earnings estimates. It could be that the analystsare reflecting the predictability of Capgemini’s earnings by assigning a price premium. 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. Currently, the most bullish analyst values Capgemini at €160 per share, while the most bearish prices it at €100.00. As you can see, analysts are not all in agreement on the stock’s future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
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 Capgemini’s rate of growth is expected to accelerate meaningfully, with the forecast 8.0% revenue growth noticeably faster than its historical growth of 4.3%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 5.1% per year. Factoring in the forecast acceleration in revenue, it’s pretty clear that Capgemini is expected to grow much faster than its industry.
The Bottom Line
The most obvious conclusion is that there’s been no major change in the business’ prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations – and our data suggests that revenues are expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn’t be too quick to come to a conclusion on Capgemini. Long-term earnings power is much more important than next year’s profits. At Simply Wall St, we have a full range of analyst estimates for Capgemini going out to 2024, and you can see them free on our platform here..
However, before you get too enthused, we’ve discovered 1 warning sign for Capgemini that you should be aware of.
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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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