EML Payments Limited Reported A Surprise Loss, And Analysts Have Updated Their Forecasts

Shareholders will be ecstatic, with their stake up 24% over the past week following EML Payments Limited's (ASX:EML) latest half-yearly results. The results don't look great, especially considering that the analysts had been forecasting a profit and EML Payments delivered a statutory loss of AU$0.072 per share. Revenues of AU$95m did beat expectations by 6.0% though. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for EML Payments

Taking into account the latest results, the consensus forecast from EML Payments' eight analysts is for revenues of AU$183.4m in 2021, which would reflect a meaningful 17% improvement in sales compared to the last 12 months. Per-share statutory losses are expected to explode, reaching AU$0.025 per share. Before this earnings report, the analysts had been forecasting revenues of AU$181.3m and earnings per share (EPS) of AU$0.049 in 2021. While the analysts have made no real change to their revenue estimates, we can see that the consensus is now modelling a loss next year - a clear dip in sentiment compared to the previous outlook of a profit.

Although the analysts are now forecasting higher losses, the average price target rose 21% to AU$4.23, which could indicate that these losses are expected to be "one-off", or are not anticipated to have a longer-term impact on the business. 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. The most optimistic EML Payments analyst has a price target of AU$5.80 per share, while the most pessimistic values it at AU$3.24. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the EML Payments' past performance and to peers in the same industry. We would highlight that EML Payments' revenue growth is expected to slow, with forecast 17% increase next year well below the historical 32%p.a. growth over the last 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. Factoring in the forecast slowdown in growth, it seems obvious that EML Payments is also expected to grow slower than other industry participants.

The Bottom Line

The biggest low-light for us was that the forecasts for EML Payments dropped from profits to a loss next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that EML Payments' revenues are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for EML Payments going out to 2025, and you can see them free on our platform here.

Plus, you should also learn about the 2 warning signs we've spotted with EML Payments .

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