Balyo SA (EPA:BALYO) shareholders are probably feeling a little disappointed, since its shares fell 3.4% to €2.42 in the week after its latest third-quarter results. Revenues were €6.4m, and Balyo came in a solid 15% 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the most recent consensus for Balyo from three analysts is for revenues of €36.6m in 2021 which, if met, would be a major 69% increase on its sales over the past 12 months. Earnings are expected to improve, with Balyo forecast to report a statutory profit of €0.042 per share. Before this earnings announcement, the analysts had been modelling revenues of €24.7m and losses of €0.16 per share in 2021. So we can see that the latest results have sparked a pretty clear upgrade to expectations, with higher revenues expected to lead to profit sooner than previously forecast.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 38% to €2.40per share. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Balyo, with the most bullish analyst valuing it at €2.90 and the most bearish at €1.50 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.
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 clear from the latest estimates that Balyo's rate of growth is expected to accelerate meaningfully, with the forecast 52% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 22% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 23% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Balyo is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that the analysts now expect Balyo to become profitable next year, compared to previous expectations that it would report a loss. Happily, they also upgraded their revenue estimates, and are forecasting revenues 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.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Balyo going out to 2023, and you can see them 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 Balyo , and understanding these should be part of your investment process.
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