Shareholders will be ecstatic, with their stake up 23% over the past week following SeaLink Travel Group Limited's (ASX:SLK) latest interim results. The results were positive, with revenue coming in at AU$571m, beating analyst expectations by 4.8%. Following the result, the 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus from SeaLink Travel Group's seven analysts is for revenues of AU$1.17b in 2021, which would reflect a reasonable 7.8% increase on its sales over the past 12 months. Statutory earnings per share are predicted to soar 510% to AU$0.27. In the lead-up to this report, the analysts had been modelling revenues of AU$1.13b and earnings per share (EPS) of AU$0.20 in 2021. So it seems there's been a definite increase in optimism about SeaLink Travel Group's future following the latest results, with a considerable lift to the earnings per share forecasts in particular.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 19% to AU$8.33per share. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values SeaLink Travel Group at AU$9.25 per share, while the most bearish prices it at AU$6.70. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that SeaLink Travel Group's revenue growth will slow down substantially, with revenues next year expected to grow 7.8%, compared to a historical growth rate of 37% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 15% next year. Factoring in the forecast slowdown in growth, it seems obvious that SeaLink Travel Group is also expected to grow slower than other industry participants.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around SeaLink Travel Group's earnings potential next year. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on SeaLink Travel Group. 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 SeaLink Travel Group going out to 2023, and you can see them free on our platform here..
Before you take the next step you should know about the 3 warning signs for SeaLink Travel Group (1 doesn't sit too well with us!) that we have uncovered.
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