The investors in Enthusiast Gaming Holdings Inc.'s (TSE:EGLX) will be rubbing their hands together with glee today, after the share price leapt 26% to CA$2.20 in the week following its quarterly results. Results overall weren't great; even though revenues of CA$16m beat expectations by 10%, statutory losses ballooned to CA$0.10 per share, substantially worse than the analysts had expected. 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 gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the three analysts covering Enthusiast Gaming Holdings are now predicting revenues of CA$149.6m in 2021. If met, this would reflect a huge 277% improvement in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 89% to CA$0.12. Yet prior to the latest earnings, the analysts had been forecasting revenues of CA$140.2m and losses of CA$0.11 per share in 2021. So it's pretty clear consensus is mixed on Enthusiast Gaming Holdings after the new consensus numbers; while the analysts lifted revenue numbers, they also administered a per-share loss expectations.
The consensus price target stayed unchanged at CA$3.69, seeming to suggest that higher forecast losses are not expected to have a long term impact on the valuation. 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 Enthusiast Gaming Holdings, with the most bullish analyst valuing it at CA$4.25 and the most bearish at CA$3.00 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Enthusiast Gaming Holdings' revenue growth is expected to slow, with forecast 277% increase next year well below the historical 1,177% growth over the last year. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 31% next year. So it's pretty clear that, while Enthusiast Gaming Holdings' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Enthusiast Gaming Holdings. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Enthusiast Gaming Holdings going out to 2022, and you can see them free on our platform here..
Don't forget that there may still be risks. For instance, we've identified 4 warning signs for Enthusiast Gaming Holdings that you should be aware of.
If you decide to trade Enthusiast Gaming Holdings, 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
Valuation is complex, but we're helping make it simple.
Find out whether Enthusiast Gaming Holdings 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.View the Free Analysis
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 firstname.lastname@example.org.