It’s been a good week for Photronics, Inc. (NASDAQ:PLAB) shareholders, because the company has just released its latest first-quarter results, and the shares gained 4.0% to US$12.96. It was a pretty mixed result, with revenues beating expectations to hit US$160m. Statutory earnings fell 2.0% short of analyst forecasts, reaching US$0.16 per share. 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 gathered the latest post-earnings forecasts to see what analysts’ statutory forecasts suggest is in store for next year.
After the latest results, the three analysts covering Photronics are now predicting revenues of US$633.8m in 2020. If met, this would reflect a decent 8.2% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to jump 41% to US$0.74. In the lead-up to this report, analysts had been modelling revenues of US$635.7m and earnings per share (EPS) of US$0.82 in 2020. So it looks like there’s been a small decline in overall sentiment after the recent results – there’s been no major change to revenue estimates, but analysts did make a minor downgrade to their earnings per share forecasts.
Despite cutting their earnings forecasts, analysts have lifted their price target 11% to US$17.00, suggesting that these impacts are not expected to weigh on the stock’s value in the long term. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Photronics analyst has a price target of US$18.00 per share, while the most pessimistic values it at US$16.00. 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.
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. Analysts are definitely expecting Photronics’s growth to accelerate, with the forecast 8.2% growth ranking favourably alongside historical growth of 2.0% per annum over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 9.1% per year. Factoring in the forecast acceleration in revenue, it’s pretty clear that Photronics is expected to grow at about the same rate as the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Photronics. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn’t be too quick to come to a conclusion on Photronics. Long-term earnings power is much more important than next year’s profits. At Simply Wall St, we have a full range of analyst estimates for Photronics going out to 2021, and you can see them free on our platform here..
We also provide an overview of the Photronics Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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