Stock Analysis

Analysts Are Updating Their Bapcor Limited (ASX:BAP) Estimates After Its Half-Year Results

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Last week, you might have seen that Bapcor Limited (ASX:BAP) released its half-year result to the market. The early response was not positive, with shares down 4.9% to AU$7.60 in the past week. Results were roughly in line with estimates, with revenues of AU$884m and statutory earnings per share of AU$0.20. 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 thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

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ASX:BAP Earnings and Revenue Growth February 18th 2021

Following the latest results, Bapcor's ten analysts are now forecasting revenues of AU$1.72b in 2021. This would be a solid 17% improvement in sales compared to the last 12 months. Per-share earnings are expected to leap 34% to AU$0.36. Before this earnings report, the analysts had been forecasting revenues of AU$1.70b and earnings per share (EPS) of AU$0.36 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

It will come as no surprise then, to learn that the consensus price target is largely unchanged at AU$8.77. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Bapcor analyst has a price target of AU$9.50 per share, while the most pessimistic values it at AU$7.30. This is a very narrow spread of estimates, implying either that Bapcor is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The analysts are definitely expecting Bapcor's growth to accelerate, with the forecast 17% growth ranking favourably alongside historical growth of 13% per annum over the past year. Compare this with other companies in the same industry, which are forecast to grow their revenue 6.5% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Bapcor to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. 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 held steady at AU$8.77, with the latest estimates not enough to have an impact on their price targets.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Bapcor going out to 2024, and you can see them free on our platform here..

We don't want to rain on the parade too much, but we did also find 2 warning signs for Bapcor that you need to be mindful of.

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