Analyst Estimates: Here's What Brokers Think Of The Reject Shop Limited (ASX:TRS) After Its Half-Yearly Report

The Reject Shop Limited (ASX:TRS) shareholders are probably feeling a little disappointed, since its shares fell 2.4% to AU$7.27 in the week after its latest half-year results. It was a credible result overall, with revenues of AU$434m and statutory earnings per share of AU$0.035 both in line with analyst estimates, showing that Reject Shop is executing in line with expectations. 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've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Reject Shop

Following the recent earnings report, the consensus from five analysts covering Reject Shop is for revenues of AU$799.8m in 2021, implying a noticeable 2.5% decline in sales compared to the last 12 months. Per-share earnings are expected to bounce 543% to AU$0.23. Before this earnings report, the analysts had been forecasting revenues of AU$801.2m and earnings per share (EPS) of AU$0.23 in 2021. So the consensus seems to have become somewhat more optimistic on Reject Shop's earnings potential following these results.

There's been no major changes to the consensus price target of AU$9.52, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Reject Shop at AU$10.34 per share, while the most bearish prices it at AU$8.85. This is a very narrow spread of estimates, implying either that Reject Shop is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Reject Shop's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 2.5%, a significant reduction from annual growth of 3.4% over the last year. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 4.0% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Reject Shop is expected to lag 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 Reject Shop following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Reject Shop. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Reject Shop analysts - going out to 2023, and you can see them free on our platform here.

Before you take the next step you should know about the 1 warning sign for Reject Shop 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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