Stingray Group Inc. Just Missed EPS By 54%: Here's What Analysts Think Will Happen Next

Shareholders of Stingray Group Inc. (TSE:RAY.A) will be pleased this week, given that the stock price is up 17% to CA$4.90 following its latest full-year results. Statutory earnings per share fell badly short of expectations, coming in at CA$0.18, some 54% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at CA$307m. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Stingray Group

Taking into account the latest results, the current consensus, from the eight analysts covering Stingray Group, is for revenues of CA$282.8m in 2021, which would reflect a discernible 7.8% reduction in Stingray Group's sales over the past 12 months. Statutory earnings per share are predicted to bounce 174% to CA$0.51. In the lead-up to this report, the analysts had been modelling revenues of CA$302.4m and earnings per share (EPS) of CA$0.52 in 2021. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a small dip in earnings per share estimates.

Despite the cuts to forecast earnings, there was no real change to the CA$7.25 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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 Stingray Group analyst has a price target of CA$8.50 per share, while the most pessimistic values it at CA$6.50. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Stingray Group is an easy business to forecast or the the analysts are all using similar assumptions.

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. We would highlight that sales are expected to reverse, with the forecast 7.8% revenue decline a notable change from historical growth of 31% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 2.0% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Stingray Group is expected to lag the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Stingray Group. 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 held steady at CA$7.25, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Stingray Group going out to 2023, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 4 warning signs for Stingray Group you should know about.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.