Earnings Update: Here's Why Analysts Just Lifted Their Grammer AG (ETR:GMM) Price Target To €28.25

It's been a pretty great week for Grammer AG (ETR:GMM) shareholders, with its shares surging 16% to €25.80 in the week since its latest yearly results. The statutory results were mixed overall, with revenues of €1.7b in line with analyst forecasts, but losses of €5.10 per share, some 4.1% larger than the analysts were predicting. 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.

View our latest analysis for Grammer

After the latest results, the twin analysts covering Grammer are now predicting revenues of €1.87b in 2021. If met, this would reflect a notable 11% improvement in sales compared to the last 12 months. Grammer is also expected to turn profitable, with statutory earnings of €2.65 per share. In the lead-up to this report, the analysts had been modelling revenues of €1.86b and earnings per share (EPS) of €1.22 in 2021. Although the revenue estimates have not really changed, we can see there's been a massive increase in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.

The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 47% to €28.25.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Grammer's rate of growth is expected to accelerate meaningfully, with the forecast 11% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 4.7% p.a. 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 Grammer to grow faster than the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Grammer's 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.

With that in mind, we wouldn't be too quick to come to a conclusion on Grammer. Long-term earnings power is much more important than next year's profits. At least one analyst has provided forecasts out to 2025, which can be seen for free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Grammer (at least 1 which is significant) , and understanding them should be part of your investment process.

If you’re looking to trade Grammer, 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 (at) simplywallst.com.