Last week, you might have seen that Helios Technologies, Inc. (NASDAQ:HLIO) released its full-year result to the market. The early response was not positive, with shares down 6.7% to US$40.85 in the past week. It looks like a credible result overall – although revenues of US$555m were in line with what analysts predicted, Helios Technologies surprised by delivering a statutory profit of US$1.88 per share, a notable 11% above expectations. 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 current consensus, from the seven analysts covering Helios Technologies, is for revenues of US$531.9m in 2020, which would reflect a measurable 4.1% reduction in Helios Technologies’s sales over the past 12 months. Statutory earnings per share are forecast to fall 11% to US$1.67 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of US$527.7m and earnings per share (EPS) of US$1.54 in 2020. So the consensus seems to have become somewhat more optimistic on Helios Technologies’s earnings potential following these results.
The consensus price target was unchanged at US$44.60, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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 Helios Technologies, with the most bullish analyst valuing it at US$49.00 and the most bearish at US$41.00 per share. 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.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 4.1% a significant reduction from annual growth of 26% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 2.0% annually for the foreseeable future. It’s pretty clear that Helios Technologies’s revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around Helios Technologies’s earnings potential next year. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will 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 in mind, we wouldn’t be too quick to come to a conclusion on Helios Technologies. 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 Helios Technologies going out to 2023, and you can see them free on our platform here..
You can also see whether Helios Technologies 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.