Information Services Corporation Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

A week ago, Information Services Corporation (TSE:ISV) came out with a strong set of second-quarter numbers that could potentially lead to a re-rate of the stock. The company beat forecasts, with revenue of CA$68m, some 9.6% above estimates, and statutory earnings per share (EPS) coming in at CA$0.56, 67% ahead of expectations. 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 Information Services

After the latest results, the six analysts covering Information Services are now predicting revenues of CA$245.5m in 2024. If met, this would reflect an okay 3.9% improvement in revenue compared to the last 12 months. Per-share earnings are expected to rise 4.3% to CA$1.19. Yet prior to the latest earnings, the analysts had been anticipated revenues of CA$243.1m and earnings per share (EPS) of CA$1.03 in 2024. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the substantial gain in earnings per share expectations following these results.

The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 5.4% to CA$33.10. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Information Services analyst has a price target of CA$36.00 per share, while the most pessimistic values it at CA$30.00. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

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. It's pretty clear that there is an expectation that Information Services' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 7.9% growth on an annualised basis. This is compared to a historical growth rate of 13% 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 6.1% annually. So it's pretty clear that, while Information Services' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Information Services' earnings potential next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

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 estimates - from multiple Information Services analysts - going out to 2025, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 5 warning signs for Information Services you should be aware of, and 2 of them are a bit unpleasant.

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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.