NexPoint Residential Trust, Inc. (NYSE:NXRT) came out with its full-year 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 of US$181m were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$4.03, missing estimates by 8.5%. 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. We’ve gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Following the latest results, NexPoint Residential Trust’s four analysts are now forecasting revenues of US$218.8m in 2020. This would be a huge 21% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to dive 94% to US$0.24 in the same period. Before this latest report, the consensus had been expecting revenues of US$212.7m and US$0.69 per share in losses. Analysts have definitely been lifting their expectations, with the company expected to reach profitability next year – sooner than expected – thanks to the modest lift to revenue expectations.
Despite these upgrades, analysts have not made any major changes to their price target of US$52.72, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. 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. The most optimistic NexPoint Residential Trust analyst has a price target of US$60.00 per share, while the most pessimistic values it at US$46.00. 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.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. Analysts are definitely expecting NexPoint Residential Trust’s growth to accelerate, with the forecast 21% growth ranking favourably alongside historical growth of 14% per annum over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 5.0% next year. Factoring in the forecast acceleration in revenue, it’s pretty clear that NexPoint Residential Trust is expected to grow much faster than its market.
The Bottom Line
The most important thing to take away from these updates is that analysts now expect NexPoint Residential Trust to become profitable next year, compared to previous expectations that it would report a loss. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider market. The consensus price target held steady at US$52.72, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have forecasts for NexPoint Residential Trust going out to 2024, and you can see them free on our platform here.
It might also be worth considering whether NexPoint Residential Trust’s debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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