Stock Analysis

Results: WildBrain Ltd. Confounded Analyst Expectations With A Surprise Profit

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Investors in WildBrain Ltd. (TSE:WILD) had a good week, as its shares rose 3.7% to close at CA$3.08 following the release of its quarterly results. In addition to beating expectations by 18% with revenues of CA$153m, WildBrain delivered a surprise (statutory) profit of CA$0.03 per share, a sweet improvement compared to the losses that the analysts forecast. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for WildBrain

TSX:WILD Earnings and Revenue Growth February 11th 2022

Following the latest results, WildBrain's seven analysts are now forecasting revenues of CA$492.9m in 2022. This would be a modest 2.6% improvement in sales compared to the last 12 months. Earnings are expected to improve, with WildBrain forecast to report a statutory profit of CA$0.04 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of CA$490.1m and losses of CA$0.085 per share in 2022. Although we saw no serious change to the revenue outlook, the analysts have definitely increased their earnings estimates, estimating a profit next year, compared to previous forecasts of a loss. So it seems like the consensus has become substantially more bullish on WildBrain.

There's been no major changes to the consensus price target of CA$4.44, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. 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. There are some variant perceptions on WildBrain, with the most bullish analyst valuing it at CA$6.00 and the most bearish at CA$3.75 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that there is an expectation that WildBrain's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 5.2% growth on an annualised basis. This is compared to a historical growth rate of 7.0% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 21% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than WildBrain.

The Bottom Line

The most important thing to take away is that there's been a clear step-change in belief around the business' prospects, with the analysts now expecting WildBrain to become profitable next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at CA$4.44, 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 WildBrain analysts - going out to 2024, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 2 warning signs for WildBrain that you should be aware of.

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

Find out whether WildBrain 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.