Stock Analysis

K-Bro Linen Inc. Just Missed EPS By 42%: Here's What Analysts Think Will Happen Next

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The first-quarter results for K-Bro Linen Inc. (TSE:KBL) were released last week, making it a good time to revisit its performance. Revenue of CA$80m surpassed estimates by 3.0%, although statutory earnings per share missed badly, coming in 42% below expectations at CA$0.17 per share. 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.

Check out our latest analysis for K-Bro Linen

TSX:KBL Earnings and Revenue Growth May 9th 2024

Taking into account the latest results, the most recent consensus for K-Bro Linen from five analysts is for revenues of CA$358.4m in 2024. If met, it would imply a notable 8.5% increase on its revenue over the past 12 months. Per-share earnings are expected to step up 15% to CA$1.91. Before this earnings report, the analysts had been forecasting revenues of CA$346.4m and earnings per share (EPS) of CA$2.07 in 2024. So it's pretty clear consensus is mixed on K-Bro Linen after the latest results; whilethe analysts lifted revenue numbers, they also administered a minor downgrade to per-share earnings expectations.

The consensus price target was unchanged at CA$44.92, suggesting the business is performing roughly in line with expectations, despite some adjustments to profit and revenue forecasts. 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 K-Bro Linen at CA$48.00 per share, while the most bearish prices it at CA$40.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

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 K-Bro Linen's growth to accelerate, with the forecast 11% annualised growth to the end of 2024 ranking favourably alongside historical growth of 6.9% 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 3.4% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect K-Bro Linen to grow faster than the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for K-Bro Linen. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. The consensus price target held steady at CA$44.92, 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 K-Bro Linen going out to 2026, and you can see them free on our platform here.

You can also see whether K-Bro Linen is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.

Valuation is complex, but we're helping make it simple.

Find out whether K-Bro Linen is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.