Revenue Beat: Data#3 Limited Beat Analyst Estimates By 9.3%

Last week, you might have seen that Data#3 Limited (ASX:DTL) released its interim result to the market. The early response was not positive, with shares down 7.3% to AU$5.71 in the past week. It was a workmanlike result, with revenues of AU$856m coming in 9.3% ahead of expectations, and statutory earnings per share of AU$0.15, in line with analyst appraisals. 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. 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 Data#3

After the latest results, the three analysts covering Data#3 are now predicting revenues of AU$1.83b in 2021. If met, this would reflect an okay 3.7% improvement in sales compared to the last 12 months. Per-share earnings are expected to expand 14% to AU$0.18. In the lead-up to this report, the analysts had been modelling revenues of AU$1.76b and earnings per share (EPS) of AU$0.17 in 2021. It looks like there's been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.

Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of AU$6.22, suggesting that the forecast performance does not have a long term impact on the company's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Data#3 at AU$6.68 per share, while the most bearish prices it at AU$5.75. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Data#3 is an easy business to forecast or the the analysts are all using similar assumptions.

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. It's pretty clear that there is an expectation that Data#3's revenue growth will slow down substantially, with revenues next year expected to grow 3.7%, compared to a historical growth rate of 13% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 25% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Data#3.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Data#3's earnings potential next year. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower 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.

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 estimates - from multiple Data#3 analysts - going out to 2023, and you can see them free on our platform here.

Even so, be aware that Data#3 is showing 1 warning sign 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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