PSI Software AG Recorded A 15% Miss On Revenue: Analysts Are Revisiting Their Models

Investors in PSI Software AG (ETR:PSAN) had a good week, as its shares rose 7.3% to close at €23.40 following the release of its quarterly results. Revenues were €58m, 15% below analyst expectations, although losses didn't appear to worsen significantly, with a statutory per-share loss of €1.01 being in line with what the analysts anticipated. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

Our analysis indicates that PSAN is potentially undervalued!

Following the latest results, PSI Software's six analysts are now forecasting revenues of €260.0m in 2022. This would be a credible 2.9% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to accumulate 5.6% to €1.02. Before this earnings report, the analysts had been forecasting revenues of €262.2m and earnings per share (EPS) of €1.15 in 2022. So there's definitely been a decline in sentiment after the latest results, noting the real cut to new EPS forecasts.

It might be a surprise to learn that the consensus price target was broadly unchanged at €42.62, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on 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 PSI Software, with the most bullish analyst valuing it at €53.00 and the most bearish at €33.00 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

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. The period to the end of 2022 brings more of the same, according to the analysts, with revenue forecast to display 5.8% growth on an annualised basis. That is in line with its 6.3% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 7.9% per year. So although PSI Software is expected to maintain its revenue growth rate, it's forecast to grow slower than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that PSI Software's revenues are expected to perform worse 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.

With that in mind, we wouldn't be too quick to come to a conclusion on PSI Software. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple PSI Software 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 1 warning sign for PSI Software that you should be aware of.

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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.