Nick Scali Limited Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

Nick Scali Limited (ASX:NCK) investors will be delighted, with the company turning in some strong numbers with its latest results. The company beat expectations with revenues of AU$373m arriving 5.2% ahead of forecasts. Statutory earnings per share (EPS) were AU$1.04, 6.4% ahead of estimates. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Nick Scali

Taking into account the latest results, the current consensus, from the five analysts covering Nick Scali, is for revenues of AU$358.0m in 2022, which would reflect a measurable 4.0% reduction in Nick Scali's sales over the past 12 months. Statutory earnings per share are forecast to dive 22% to AU$0.81 in the same period. In the lead-up to this report, the analysts had been modelling revenues of AU$340.9m and earnings per share (EPS) of AU$0.74 in 2022. It looks like there's been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.

Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of AU$12.40, suggesting that the forecast performance does not have a long term impact on the company's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Nick Scali at AU$18.00 per share, while the most bearish prices it at AU$10.80. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Nick Scali shareholders.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 4.0% by the end of 2022. This indicates a significant reduction from annual growth of 8.6% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.6% per year. It's pretty clear that Nick Scali's revenues are expected to perform substantially worse 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 Nick Scali following these results. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider industry. The consensus price target held steady at AU$12.40, with the latest estimates not enough to have an impact on their price targets.

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. We have estimates - from multiple Nick Scali analysts - going out to 2024, 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 Nick Scali (1 makes us a bit uncomfortable!) that we have uncovered.

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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.
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