NFON AG (ETR:NFN) Analysts Are Pretty Bullish On The Stock After Recent Results

Investors in NFON AG (ETR:NFN) had a good week, as its shares rose 6.2% to close at €18.05 following the release of its quarterly results. Revenues were €16m, with NFON reporting some 6.4% below analyst 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.

See our latest analysis for NFON

Taking into account the latest results, the consensus forecast from NFON's four analysts is for revenues of €68.1m in 2020, which would reflect a reasonable 4.7% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 52% to €0.22. Yet prior to the latest earnings, the analysts had been forecasting revenues of €69.1m and losses of €0.37 per share in 2020. While the revenue estimates were largely unchanged, sentiment seems to have improved, with the analysts upgrading revenues and making a losses per share in particular.

The average price target rose 13% to €19.75, with the analysts signalling that the forecast reduction in losses would be a positive for the stock's 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 NFON, with the most bullish analyst valuing it at €22.00 and the most bearish at €15.00 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await NFON shareholders.

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. It's pretty clear that there is an expectation that NFON's revenue growth will slow down substantially, with revenues next year expected to grow 4.7%, compared to a historical growth rate of 21% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 3.1% next year. Even after the forecast slowdown in growth, it seems obvious that NFON is also expected to grow faster than the wider industry.

The Bottom Line

The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on NFON. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple NFON analysts - going out to 2023, 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 NFON that you should be aware of.

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