Shareholders of Topps Tiles Plc (LON:TPT) will be pleased this week, given that the stock price is up 10% to UK£0.72 following its latest annual results. It looks like a pretty bad result, all things considered. Although revenues of UK£219m were in line with analyst predictions, earnings fell badly short, missing estimates by 22% to hit UK£0.052 per share. Earnings are an important time for investors, as they can track a company’s performance, look at what top analysts are forecasting for next year, and see if there’s been a change in sentiment towards the company. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.
Taking into account the latest results, the most recent consensus for Topps Tiles from three analysts is for revenues of UK£225.2m in 2020, which is a modest 2.7% increase on its sales over the past 12 months. Earnings per share are expected to surge 25% to UK£0.065. In the lead-up to this report, analysts had been modelling revenues of UK£227.9m and earnings per share (EPS) of UK£0.07 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.
It might be a surprise to learn that the consensus price target was broadly unchanged at UK£0.83, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. That’s not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Topps Tiles analyst has a price target of UK£1.00 per share, while the most pessimistic values it at UK£0.65. As you can see, analysts are not all in agreement on the stock’s future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
In addition, we can look to Topps Tiles’s past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. It’s clear from the latest estimates that Topps Tiles’s rate of growth is expected to accelerate meaningfully, with forecast 2.7% revenue growth noticeably faster than its historical growth of 1.5%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 3.9% per year. So it’s clear that despite the acceleration in growth, Topps Tiles is expected to grow meaningfully slower than the market average.
The Bottom Line
The biggest highlight of the new consensus is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Topps Tiles. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at UK£0.83, 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 estimates – from multiple Topps Tiles analysts – going out to 2022, and you can see them free on our platform here.
It might also be worth considering whether Topps Tiles’s debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.