IRESS Limited Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

The yearly results for IRESS Limited (ASX:IRE) were released last week, making it a good time to revisit its performance. Revenues were AU$543m, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of AU$0.32 were also better than expected, beating analyst predictions by 11%. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

View our latest analysis for IRESS

Taking into account the latest results, the consensus forecast from IRESS' nine analysts is for revenues of AU$608.5m in 2021, which would reflect a meaningful 12% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to dip 5.6% to AU$0.30 in the same period. Before this earnings report, the analysts had been forecasting revenues of AU$613.2m and earnings per share (EPS) of AU$0.34 in 2021. So there's definitely been a decline in sentiment after the latest results, noting the real cut to new EPS forecasts.

The consensus price target held steady at AU$11.30, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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 IRESS at AU$12.00 per share, while the most bearish prices it at AU$10.95. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting IRESS' growth to accelerate, with the forecast 12% growth ranking favourably alongside historical growth of 8.4% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 17% per year. So it's clear that despite the acceleration in growth, IRESS is expected to grow meaningfully slower than the industry average.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for IRESS. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that IRESS' revenues are expected to perform worse than the wider industry. The consensus price target held steady at AU$11.30, with the latest estimates not enough to have an impact on their price targets.

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 IRESS going out to 2025, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 2 warning signs for IRESS (of which 1 is concerning!) 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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