Last week, you might have seen that National Express Group PLC (LON:NEX) released its yearly result to the market. The early response was not positive, with shares down 3.6% to UK£4.24 in the past week. National Express Group reported in line with analyst predictions, delivering revenues of UK£2.7b and statutory earnings per share of UK£0.28, suggesting the business is executing well and in line with its plan. 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. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether analysts have changed their mind on National Express Group after the latest results.
Taking into account the latest results, the current consensus from National Express Group’s five analysts is for revenues of UK£2.85b in 2020, which would reflect an okay 3.9% increase on its sales over the past 12 months. Statutory earnings per share are expected to increase 6.4% to UK£0.29. Before this earnings report, analysts had been forecasting revenues of UK£2.93b and earnings per share (EPS) of UK£0.30 in 2020. So it looks like analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is expected to maintain EPS.
The consensus has reconfirmed its price target of UK£4.80, showing that analysts don’t expect weaker sales expectations next year to have a material impact on National Express Group’s market value. 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 National Express Group at UK£5.20 per share, while the most bearish prices it at UK£4.35. 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.
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. We would highlight that National Express Group’s revenue growth is expected to slow, with forecast 3.9% increase next year well below the historical 8.6%p.a. growth over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue shrink 5.0% per year. So it’s clear that despite the slowdown in growth, National Express Group is still expected to grow meaningfully faster than the wider market.
The Bottom Line
The most obvious conclusion from these results is that there’s been no major change in the business’ prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Unfortunately they also cut their revenue estimates for next year, although at least they still expect the business to grow faster than the wider market. That said, earnings per share are more important for creating value for shareholders. 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.
With that in mind, we wouldn’t be too quick to come to a conclusion on National Express Group. Long-term earnings power is much more important than next year’s profits. We have forecasts for National Express Group going out to 2022, and you can see them free on our platform here.
You can also see whether National Express Group 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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