It’s been a sad week for QAD Inc. (NASDAQ:QADA), who’ve watched their investment drop 12% to US$31.85 in the week since the company reported its full-year result. Sales hit US$311m in line with forecasts, although the company reported a statutory loss per share of US$0.82 that was somewhat smaller than the analysts expected. The 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 thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, QAD’s four analysts currently expect revenues in 2021 to be US$312.5m, approximately in line with the last 12 months. QAD is also expected to turn profitable, with statutory earnings of US$0.10 per share. In the lead-up to this report, the analysts had been modelling revenues of US$332.2m and earnings per share (EPS) of US$0.30 in 2021. The analysts seem less optimistic after the recent results, reducing their sales forecasts and making a pretty serious reduction to earnings per share numbers.
The consensus price target fell 25% to US$44.50, with the weaker earnings outlook clearly leading valuation estimates. The consensus price target is just an average of individual analyst targets, so – it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values QAD at US$50.00 per share, while the most bearish prices it at US$40.00. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that QAD’s revenue growth is expected to slow, with forecast 0.6% increase next year well below the historical 3.1%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 12% per year. Factoring in the forecast slowdown in growth, it seems obvious that QAD is also expected to grow slower than other industry participants.
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. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of QAD’s future valuation.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates – from multiple QAD analysts – going out to 2022, and you can see them free on our platform here.
Plus, you should also learn about the 2 warning signs we’ve spotted with QAD .
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