Elmo Software Limited (ASX:ELO) Just Released Its Full-Year Results And Analysts Are Updating Their Estimates

Last week, you might have seen that Elmo Software Limited (ASX:ELO) released its full-year result to the market. The early response was not positive, with shares down 6.7% to AU$6.09 in the past week. The statutory results were not great - while revenues of AU$50m were in line with expectations,Elmo Software lost AU$0.25 a share in the process. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for Elmo Software

Following the latest results, Elmo Software's five analysts are now forecasting revenues of AU$68.4m in 2021. This would be a major 37% improvement in sales compared to the last 12 months. Per-share losses are supposed to see a sharp uptick, reaching AU$0.30. Before this earnings announcement, the analysts had been modelling revenues of AU$68.0m and losses of AU$0.28 per share in 2021. So it's pretty clear consensus is mixed on Elmo Software after the new consensus numbers; while the analysts held their revenue numbers steady, they also administered a moderate increase in per-share loss expectations.

As a result, there was no major change to the consensus price target of AU$7.27, with the analysts implicitly confirming that the business looks to be performing in line with expectations, despite higher forecast losses. 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. The most optimistic Elmo Software analyst has a price target of AU$9.70 per share, while the most pessimistic values it at AU$3.13. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

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 clear from the latest estimates that Elmo Software's rate of growth is expected to accelerate meaningfully, with the forecast 37% revenue growth noticeably faster than its historical growth of 25% over the past year. Compare this with other companies in the same industry, which are forecast to grow their revenue 17% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Elmo Software to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at AU$7.27, with the latest estimates not enough to have an impact on their price targets.

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 Elmo Software analysts - going out to 2023, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Elmo Software (1 shouldn't be ignored!) that you need to be mindful of.

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