Information Services Corporation Just Missed EPS By 11%: Here's What Analysts Think Will Happen Next

It's been a good week for Information Services Corporation (TSE:ISV) shareholders, because the company has just released its latest quarterly results, and the shares gained 9.9% to CA$31.08. Results were mixed, with revenues of CA$45m exceeding expectations, even as earnings per share (EPS) came up short. Statutory earnings were CA$0.36 per share, -11% below whatthe analysts had forecast. 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.

View our latest analysis for Information Services

After the latest results, the five analysts covering Information Services are now predicting revenues of CA$173.9m in 2021. If met, this would reflect a notable 8.8% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to rise 4.5% to CA$1.49. In the lead-up to this report, the analysts had been modelling revenues of CA$156.8m and earnings per share (EPS) of CA$1.51 in 2021. It seems sentiment has certainly become more bullish on revenues, even though they haven't changed their view on earnings per share.

The consensus price target increased 6.1% to CA$32.85, with an improved revenue forecast carrying the promise of a more valuable business, in time. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Information Services analyst has a price target of CA$33.25 per share, while the most pessimistic values it at CA$30.50. 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.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting Information Services' growth to accelerate, with the forecast 18% annualised growth to the end of 2021 ranking favourably alongside historical growth of 12% 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 6.8% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Information Services to grow faster than the wider industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Happily, they also upgraded their revenue estimates, and are forecasting revenues 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 forecasts for Information Services going out to 2022, and you can see them free on our platform here.

It is also worth noting that we have found 2 warning signs for Information Services that you need to take into consideration.

If you're looking for stocks to buy, 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

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 (at) simplywallst.com.