Earnings Beat: carsales.com Ltd Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

Investors in carsales.com Ltd (ASX:CAR) had a good week, as its shares rose 9.9% to close at AU$27.10 following the release of its full-year results. Revenues were AU$781m, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at AU$1.81, an impressive 40% ahead of estimates. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for carsales.com

Taking into account the latest results, the most recent consensus for carsales.com from 14 analysts is for revenues of AU$1.07b in 2024. If met, it would imply a sizeable 37% increase on its revenue over the past 12 months. Statutory earnings per share are forecast to crater 52% to AU$0.83 in the same period. In the lead-up to this report, the analysts had been modelling revenues of AU$1.01b and earnings per share (EPS) of AU$0.80 in 2024. So there seems to have been a moderate uplift in sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.

It will come as no surprise to learn that the analysts have increased their price target for carsales.com 8.3% to AU$27.13on the back of these upgrades. 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 carsales.com analyst has a price target of AU$30.19 per share, while the most pessimistic values it at AU$22.36. This is a very narrow spread of estimates, implying either that carsales.com is an easy company to value, or - more likely - the analysts are relying heavily on some key 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. The analysts are definitely expecting carsales.com's growth to accelerate, with the forecast 37% annualised growth to the end of 2024 ranking favourably alongside historical growth of 12% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 8.3% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that carsales.com is expected to grow much faster than its industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around carsales.com's earnings potential next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster 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.

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. At Simply Wall St, we have a full range of analyst estimates for carsales.com going out to 2026, 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 carsales.com (of which 1 is a bit unpleasant!) you should know about.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.