MTY Food Group Inc. (TSE:MTY) came out with its annual results last week, and we wanted to see how the business is performing and what top analysts think of the company following this report. Revenues were CA$551m, with MTY Food Group reporting some -3.1% below analyst expectations. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following the latest results, MTY Food Group’s six analysts are now forecasting revenues of CA$643.8m in 2020. This would be a decent 17% improvement in sales compared to the last 12 months. Prior to the latest earnings, analysts were forecasting revenues of CA$657.9m in 2020, and did not provide an EPS estimate. The consensus seems a bit less optimistic overall, with the revenue forecasts following the latest results.
Intriguingly, analysts have cut their price target 5.6% to CA$60.86 showing a clear decline in sentiment around MTY Food Group’s 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. There are some variant perceptions on MTY Food Group, with the most bullish analyst valuing it at CA$72.00 and the most bearish at CA$48.50 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
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 pretty clear that analysts expect MTY Food Group’s revenue growth will slow down substantially, with revenues next year expected to grow 17%, compared to a historical growth rate of 30% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 6.9% next year. So it’s pretty clear that, while MTY Food Group’s revenue growth is expected to slow, it’s still expected to grow faster than the market itself.
The Bottom Line
The most important thing to take away from these updates is that analysts are definitely optimistic on the business, given that they’ve begun forecasting positive per-share earnings for next year. Unfortunately analysts also downgraded their revenue estimates, although industry data suggests that MTY Food Group’s revenues are expected to grow faster than the wider market. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
At least one of MTY Food Group’s six analysts has provided estimates out to 2024, which can be seen for free on our platform here.
It might also be worth considering whether MTY Food Group’s debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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