Last week, you might have seen that Mapfre, S.A. (BME:MAP) released its half-year result to the market. The early response was not positive, with shares down 4.9% to €1.57 in the past week. It looks like the results were a bit of a negative overall. While revenues of €11b were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 9.1% to hit €0.05 per share. Following the result, the 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. 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, Mapfre’s nine analysts currently expect revenues in 2020 to be €20.6b, approximately in line with the last 12 months. Per-share earnings are expected to increase 5.4% to €0.18. In the lead-up to this report, the analysts had been modelling revenues of €21.4b and earnings per share (EPS) of €0.20 in 2020. The analysts seem less optimistic after the recent results, reducing their sales forecasts and making a real cut to earnings per share numbers.
Despite the cuts to forecast earnings, there was no real change to the €1.92 price target, showing that the analysts don’t think the changes have a meaningful impact on its intrinsic value. 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. Currently, the most bullish analyst values Mapfre at €2.18 per share, while the most bearish prices it at €1.40. This shows there is still a bit of diversity in estimates, but analysts don’t appear to be totally split on the stock as though it might be a success or failure situation.
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. The analysts are definitely expecting Mapfre’s growth to accelerate, with the forecast 1.3% growth ranking favourably alongside historical growth of 0.2% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue shrink 5.1% per year. It seems obvious that as part of the brighter growth outlook, Mapfre is expected to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately, they also downgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at €1.92, with the latest estimates not enough to have an impact on their price targets.
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 Mapfre going out to 2023, and you can see them free on our platform here.
Even so, be aware that Mapfre is showing 1 warning sign in our investment analysis , you should know about…
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