Vivara Participações S.A. (BVMF:VIVA3) last week reported its latest annual results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. It was a negative result overall, with revenues coming in 10% less than what the analysts expected, at R$1.0b. 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 collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following the latest results, Vivara Participações' three analysts are now forecasting revenues of R$1.32b in 2021. This would be a huge 26% improvement in sales compared to the last 12 months. Per-share earnings are expected to surge 37% to R$0.85. Before this earnings report, the analysts had been forecasting revenues of R$1.63b and earnings per share (EPS) of R$0.99 in 2021. It looks like sentiment has declined substantially in the aftermath of these results, with a real cut to revenue estimates and a substantial drop in earnings per share numbers as well.
What's most unexpected is that the consensus price target rose 6.0% to R$29.67, strongly implying the downgrade to forecasts is not expected to be more than a temporary blip. 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 Vivara Participações at R$34.00 per share, while the most bearish prices it at R$25.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting Vivara Participações' growth to accelerate, with the forecast 26% annualised growth to the end of 2021 ranking favourably alongside historical growth of 3.1% per annum over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 19% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Vivara Participações is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will 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.
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 Vivara Participações going out to 2023, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 2 warning signs for Vivara Participações you should be aware of.
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