Premier Investments Limited Just Beat EPS By 6.4%: Here's What Analysts Think Will Happen Next

Investors in Premier Investments Limited (ASX:PMV) had a good week, as its shares rose 5.1% to close at AU$24.94 following the release of its interim results. Premier Investments reported AU$785m in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of AU$1.18 beat expectations, being 6.4% higher than what the analysts expected. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for Premier Investments

After the latest results, the nine analysts covering Premier Investments are now predicting revenues of AU$1.40b in 2021. If met, this would reflect a satisfactory 7.6% improvement in sales compared to the last 12 months. Per-share earnings are expected to increase 5.6% to AU$1.51. In the lead-up to this report, the analysts had been modelling revenues of AU$1.36b and earnings per share (EPS) of AU$1.35 in 2021. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a nice gain to earnings per share in particular.

Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of AU$22.99, suggesting that the forecast performance does not have a long term impact on the company's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Premier Investments, with the most bullish analyst valuing it at AU$28.00 and the most bearish at AU$17.50 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Premier Investments' past performance and to peers in the same industry. The analysts are definitely expecting Premier Investments' growth to accelerate, with the forecast 16% annualised growth to the end of 2021 ranking favourably alongside historical growth of 5.0% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 5.0% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Premier Investments is expected to grow much faster than its 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 Premier Investments following these results. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. The consensus price target held steady at AU$22.99, with the latest estimates not enough to have an impact on their price targets.

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 Premier Investments going out to 2025, and you can see them free on our platform here.

Even so, be aware that Premier Investments is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

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