Genpact Limited (NYSE:G) shares fell 3.8% to US$42.57 in the week since its latest annual results. Revenues of US$3.5b were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$1.56, missing estimates by 2.1%. This is an important time for investors, as they can track a company’s performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see analysts’ latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the most recent consensus for Genpact from ten analysts is for revenues of US$3.92b in 2020, which is a meaningful 11% increase on its sales over the past 12 months. Statutory earnings per share are expected to ascend 10% to US$1.77. In the lead-up to this report, analysts had been modelling revenues of US$3.84b and earnings per share (EPS) of US$1.84 in 2020. Overall it looks as though analysts were a bit mixed on the latest results. Although there was a a meaningful to revenue, the consensus also made a minor downgrade to to its earnings per share forecasts.
There’s been no major changes to an analyst price target of US$48.50, suggesting that the impact of higher forecast sales and lower earnings won’t result in a meaningful change to the business’ valuation. 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. The most optimistic Genpact analyst has a price target of US$52.00 per share, while the most pessimistic values it at US$44.00. The narrow spread of estimates could suggest that the business’ future is relatively easy to value, or that analysts have a clear view on its prospects.
Further, we can compare these estimates to past performance, and see how Genpact forecasts compare to the wider market’s forecast performance. Analysts are definitely expecting Genpact’s growth to accelerate, with the forecast 11% growth ranking favourably alongside historical growth of 8.0% per annum over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 11% per year. Factoring in the forecast acceleration in revenue, it’s pretty clear that Genpact is expected to grow at about the same rate as the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Genpact. They also upgraded their revenue forecasts, although the latest estimates suggest that Genpact will grow in line with the overall 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 in mind, we wouldn’t be too quick to come to a conclusion on Genpact. Long-term earnings power is much more important than next year’s profits. We have forecasts for Genpact going out to 2022, and you can see them free on our platform here.
You can also see whether Genpact is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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