As you might know, Praemium Limited (ASX:PPS) recently reported its half-year numbers. Revenues came in 8.3% below expectations, at AU$31m. Statutory earnings per share were relatively better off, with a per-share profit of AU$0.012 being roughly in line with analyst estimates. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
After the latest results, the six analysts covering Praemium are now predicting revenues of AU$70.6m in 2021. If met, this would reflect a major 27% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to dive 53% to AU$0.0078 in the same period. In the lead-up to this report, the analysts had been modelling revenues of AU$67.2m and earnings per share (EPS) of AU$0.0074 in 2021. So there seems to have been a moderate uplift in sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.
It will come as no surprise to learn that the analysts have increased their price target for Praemium 11% to AU$0.87on the back of these upgrades. 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. There are some variant perceptions on Praemium, with the most bullish analyst valuing it at AU$1.01 and the most bearish at AU$0.48 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Praemium's growth to accelerate, with the forecast 27% growth ranking favourably alongside historical growth of 14% per annum over the past five years. 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 Praemium to grow faster than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Praemium's earnings potential next year. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn't be too quick to come to a conclusion on Praemium. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Praemium analysts - going out to 2024, and you can see them free on our platform here.
Before you take the next step you should know about the 1 warning sign for Praemium that we have uncovered.
If you decide to trade Praemium, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.