Earnings Release: Here's Why Analysts Cut Their oOh!media Limited (ASX:OML) Price Target To AU$1.83

It's been a good week for oOh!media Limited (ASX:OML) shareholders, because the company has just released its latest full-year results, and the shares gained 8.5% to AU$1.73. Revenues came in at AU$427m, in line with expectations, while statutory losses per share were substantially higher than expected, at AU$0.07 per share. 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 oOh!media

Taking into account the latest results, the current consensus from oOh!media's six analysts is for revenues of AU$558.6m in 2021, which would reflect a sizeable 31% increase on its sales over the past 12 months. Earnings are expected to improve, with oOh!media forecast to report a statutory profit of AU$0.055 per share. In the lead-up to this report, the analysts had been modelling revenues of AU$551.7m and earnings per share (EPS) of AU$0.045 in 2021. Although the revenue estimates have not really changed, we can see there's been a considerable lift to earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.

The consensus price target fell 8.1% to AU$1.83, suggesting the increase in earnings forecasts was not enough to offset other the analysts concerns. 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. Currently, the most bullish analyst values oOh!media at AU$2.30 per share, while the most bearish prices it at AU$1.35. 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.

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. The analysts are definitely expecting oOh!media's growth to accelerate, with the forecast 31% growth ranking favourably alongside historical growth of 14% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 4.3% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect oOh!media to grow faster than the wider industry.

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 oOh!media following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of oOh!media's future valuation.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for oOh!media going out to 2023, and you can see them free on our platform here.

Even so, be aware that oOh!media is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...

If you’re looking to trade oOh!media, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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