RediShred Capital Corp. Just Beat Revenue Estimates By 5.7%

It's been a good week for RediShred Capital Corp. (CVE:KUT) shareholders, because the company has just released its latest quarterly results, and the shares gained 8.0% to CA$0.54. Results overall were respectable, with statutory earnings of CA$0.006 per share roughly in line with what the analysts had forecast. Revenues of CA$6.7m came in 5.7% ahead of analyst predictions. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for RediShred Capital

After the latest results, the three analysts covering RediShred Capital are now predicting revenues of CA$29.0m in 2021. If met, this would reflect a notable 13% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to crater 26% to CA$0.02 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of CA$29.0m and earnings per share (EPS) of CA$0.02 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

The consensus price target rose 24% to CA$0.85despite there being no meaningful change to earnings estimates. It could be that the analystsare reflecting the predictability of RediShred Capital's earnings by assigning a price premium. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values RediShred Capital at CA$0.90 per share, while the most bearish prices it at CA$0.80. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting RediShred Capital is an easy business to forecast or the the analysts are all using similar assumptions.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the RediShred Capital's past performance and to peers in the same industry. It's pretty clear that there is an expectation that RediShred Capital's revenue growth will slow down substantially, with revenues next year expected to grow 13%, compared to a historical growth rate of 26% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 12% next year. Factoring in the forecast slowdown in growth, it looks like RediShred Capital is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall 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.

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 forecasts for RediShred Capital going out to 2021, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with RediShred Capital (at least 2 which make us uncomfortable) , and understanding these should be part of your investment process.

If you’re looking to trade RediShred Capital, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide 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@simplywallst.com.