Pepper Money Limited (ASX:PPM) Analysts Are Pretty Bullish On The Stock After Recent Results

It's been a pretty great week for Pepper Money Limited (ASX:PPM) shareholders, with its shares surging 12% to AU$1.62 in the week since its latest yearly results. The result was fairly weak overall, with revenues of AU$418m being 4.2% less than what the analysts had been modelling. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for Pepper Money

Following the latest results, Pepper Money's four analysts are now forecasting revenues of AU$441.8m in 2024. This would be a reasonable 5.8% improvement in revenue compared to the last 12 months. Statutory earnings per share are forecast to decline 18% to AU$0.21 in the same period. In the lead-up to this report, the analysts had been modelling revenues of AU$446.3m and earnings per share (EPS) of AU$0.20 in 2024. So the consensus seems to have become somewhat more optimistic on Pepper Money's earnings potential following these results.

The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 14% to AU$1.65. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Pepper Money analyst has a price target of AU$1.80 per share, while the most pessimistic values it at AU$1.55. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Pepper Money 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. One thing stands out from these estimates, which is that Pepper Money is forecast to grow faster in the future than it has in the past, with revenues expected to display 5.8% annualised growth until the end of 2024. If achieved, this would be a much better result than the 2.5% annual decline over the past five years. What's also interesting is that our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue decline 7.1% annually for the foreseeable future. So although Pepper Money is expected to return to growth, it's also expected to grow revenues during a time when the wider industry is estimated to see revenue decline.

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 Pepper Money following these results. On the plus side, they made no changes to their revenue estimates - and they expect it to perform better than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

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 forecasts for Pepper Money going out to 2026, and you can see them free on our platform here.

You still need to take note of risks, for example - Pepper Money has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.