AU$4.47: That's What Analysts Think Appen Limited (ASX:APX) Is Worth After Its Latest Results

There's been a notable change in appetite for Appen Limited (ASX:APX) shares in the week since its half-yearly report, with the stock down 11% to AU$3.89. Results were roughly in line with estimates, with revenues of US$182m and statutory earnings per share of US$0.23. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

Check out our latest analysis for Appen

Taking into account the latest results, the current consensus, from the eleven analysts covering Appen, is for revenues of US$408.0m in 2022, which would reflect a measurable 5.9% reduction in Appen's sales over the past 12 months. The company is forecast to report a statutory loss of US$0.06 in 2022, a sharp decline from a profit over the last year. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$420.6m and earnings per share (EPS) of US$0.029 in 2022. The analysts have made an abrupt about-face on Appen, administering a minor downgrade to to revenue forecasts and slashing the earnings outlook from a profit to loss.

The average price target fell 5.7% to AU$4.47, implicitly signalling that lower earnings per share are a leading indicator for Appen's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Appen at AU$6.60 per share, while the most bearish prices it at AU$3.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Appen's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 11% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 23% 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 11% annually for the foreseeable future. It's pretty clear that Appen's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts are expecting Appen to become unprofitable next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

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 forecasts for Appen going out to 2024, and you can see them free on our platform here.

It is also worth noting that we have found 1 warning sign for Appen that you need to take into consideration.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.