National Vision Holdings, Inc. (NASDAQ:EYE) shares fell 2.1% to US$35.18 in the week since its latest yearly results. It looks like a credible result overall – although revenues of US$1.7b were in line with what analysts predicted, National Vision Holdings surprised by delivering a statutory profit of US$0.40 per share, a notable 17% above expectations. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether analysts have changed their mind on National Vision Holdings after the latest results.
Following the latest results, National Vision Holdings’s ten analysts are now forecasting revenues of US$1.90b in 2020. This would be a meaningful 10% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to jump 61% to US$0.67. In the lead-up to this report, analysts had been modelling revenues of US$1.87b and earnings per share (EPS) of US$0.61 in 2020. There was no real change to the revenue estimates, but analysts do seem more bullish on earnings, given the solid gain to earnings per share expectations following these results.
The consensus price target rose 7.3% to US$41.85, suggesting that higher earnings estimates flow through to the stock’s valuation as well. 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 National Vision Holdings, with the most bullish analyst valuing it at US$46.00 and the most bearish at US$37.00 per share. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
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. Next year brings more of the same, according to analysts, with revenue forecast to grow 10%, in line with its 12% annual growth over the past five years. Compare this with the wider market, which analyst estimates (in aggregate) suggest will see revenues grow 5.7% next year. So it’s pretty clear that National Vision Holdings is forecast to grow substantially faster than its market.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards National Vision Holdings following these results. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn’t be too quick to come to a conclusion on National Vision Holdings. Long-term earnings power is much more important than next year’s profits. We have forecasts for National Vision Holdings going out to 2024, and you can see them free on our platform here.
You can also see whether National Vision Holdings is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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