Investors in Shaver Shop Group Limited (ASX:SSG) had a good week, as its shares rose 6.8% to close at AU$1.17 following the release of its half-year results. Results were roughly in line with estimates, with revenues of AU$124m and statutory earnings per share of AU$0.084. 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 gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following last week's earnings report, Shaver Shop Group's twin analysts are forecasting 2021 revenues to be AU$207.5m, approximately in line with the last 12 months. Statutory earnings per share are expected to drop 12% to AU$0.12 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of AU$214.1m and earnings per share (EPS) of AU$0.12 in 2021. If anything, the analysts look to have become slightly more optimistic overall; while they decreased their revenue forecasts, EPS predictions increased and ultimately earnings are more important.
The consensus has made no major changes to the price target of AU$1.44, suggesting the forecast improvement in earnings is expected to offset the decline in revenues next year.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 1.7%, a significant reduction from annual growth of 14% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 4.7% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Shaver Shop Group is expected to lag the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Shaver Shop Group's earnings potential next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Even so, long term profitability is more important for the value creation process. The consensus price target held steady at AU$1.44, 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 analyst estimates for Shaver Shop Group going out as far as 2024, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for Shaver Shop Group that you should be aware of.
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