Last week saw the newest quarterly earnings release from C&A Modas S.A. (BVMF:CEAB3), an important milestone in the company's journey to build a stronger business. Results were roughly in line with estimates, with revenues of R$1.1b and statutory earnings per share of R$3.15. 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.
Taking into account the latest results, the current consensus from C&A Modas' six analysts is for revenues of R$6.40b in 2021, which would reflect a huge 57% increase on its sales over the past 12 months. Earnings are expected to improve, with C&A Modas forecast to report a statutory profit of R$0.62 per share. Before this earnings report, the analysts had been forecasting revenues of R$5.59b and earnings per share (EPS) of R$0.44 in 2021. So we can see there's been a pretty clear increase in sentiment following the latest results, with both revenues and earnings per share receiving a decent lift in the latest estimates.
Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of R$16.50, suggesting that the forecast performance does not have a long term impact on the company's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values C&A Modas at R$18.00 per share, while the most bearish prices it at R$15.00. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the C&A Modas' past performance and to peers in the same industry. For example, we noticed that C&A Modas' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 43% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 5.6% a year over the past three years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 15% annually. So it looks like C&A Modas is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around C&A Modas' earnings potential next year. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. The consensus price target held steady at R$16.50, 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 C&A Modas analysts - going out to 2022, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 3 warning signs for C&A Modas you should be aware of, and 1 of them makes us a bit uncomfortable.
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