Earnings Update: Altium Limited (ASX:ALU) Just Reported Its Half-Year Results And Analysts Are Updating Their Forecasts

Shareholders might have noticed that Altium Limited (ASX:ALU) filed its interim result this time last week. The early response was not positive, with shares down 2.2% to AU$29.33 in the past week. It was an okay result overall, with revenues coming in at US$89m, roughly what the analysts had been expecting. 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.

View our latest analysis for Altium

Following last week's earnings report, Altium's twelve analysts are forecasting 2021 revenues to be US$188.8m, approximately in line with the last 12 months. Per-share earnings are expected to jump 85% to US$0.40. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$195.5m and earnings per share (EPS) of US$0.37 in 2021. So it's pretty clear that while sentiment around revenues has declined following the latest results, the analysts are now more bullish on the company's earnings power.

The consensus has made no major changes to the price target of AU$33.44, suggesting the forecast improvement in earnings is expected to offset the decline in revenues next year. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Altium, with the most bullish analyst valuing it at AU$41.17 and the most bearish at AU$31.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

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. We would highlight that Altium's revenue growth is expected to slow, with forecast 1.5% increase next year well below the historical 17%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 17% next year. Factoring in the forecast slowdown in growth, it seems obvious that Altium is also expected to grow slower than other industry participants.

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 Altium following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Still, earnings per share are more important to value creation for shareholders. 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 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 Altium going out to 2025, and you can see them free on our platform here..

Even so, be aware that Altium is showing 2 warning signs in our investment analysis , you should know about...

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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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