Magellan Financial Group Limited (ASX:MFG) Just Released Its Half-Year Results And Analysts Are Updating Their Estimates

Magellan Financial Group Limited (ASX:MFG) shareholders are probably feeling a little disappointed, since its shares fell 3.7% to AU$48.45 in the week after its latest half-year results. It was a credible result overall, with revenues of AU$327m and statutory earnings per share of AU$1.11 both in line with analyst estimates, showing that Magellan Financial Group is executing in line with expectations. 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.

See our latest analysis for Magellan Financial Group

Following last week's earnings report, Magellan Financial Group's 13 analysts are forecasting 2021 revenues to be AU$669.3m, approximately in line with the last 12 months. Statutory per share are forecast to be AU$2.23, approximately in line with the last 12 months. In the lead-up to this report, the analysts had been modelling revenues of AU$690.7m and earnings per share (EPS) of AU$2.17 in 2021. If anything, the analysts look to have become slightly more optimistic overall; while they decreased their revenue forecasts, EPS predictions increased and ultimately earnings are more important.

There's been no real change to the average price target of AU$54.73, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company's valuation over a longer timeframe. 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. There are some variant perceptions on Magellan Financial Group, with the most bullish analyst valuing it at AU$70.48 and the most bearish at AU$39.60 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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 Magellan Financial Group's revenue growth is expected to slow, with forecast 1.0% increase next year well below the historical 19%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 5.9% next year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Magellan Financial Group.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Magellan Financial Group following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Even so, earnings are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Magellan Financial Group. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Magellan Financial Group analysts - going out to 2025, and you can see them free on our platform here.

Before you take the next step you should know about the 2 warning signs for Magellan Financial Group that we have uncovered.

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