Results: Virgin Money UK PLC Beat Earnings Expectations And Analysts Now Have New Forecasts

By
Simply Wall St
Published
November 26, 2021
LSE:VMUK
Source: Shutterstock

As you might know, Virgin Money UK PLC (LON:VMUK) just kicked off its latest yearly results with some very strong numbers. It was overall a positive result, with revenues beating expectations by 4.7% to hit UK£1.6b. Virgin Money UK also reported a statutory profit of UK£0.27, which was an impressive 35% above what the analysts had forecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Virgin Money UK

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LSE:VMUK Earnings and Revenue Growth November 26th 2021

Taking into account the latest results, the most recent consensus for Virgin Money UK from 21 analysts is for revenues of UK£1.66b in 2022 which, if met, would be a satisfactory 2.5% increase on its sales over the past 12 months. Statutory earnings per share are forecast to crater 24% to UK£0.21 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of UK£1.66b and earnings per share (EPS) of UK£0.21 in 2022. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

There were no changes to revenue or earnings estimates or the price target of UK£2.21, suggesting that the company has met expectations in its recent result. 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 Virgin Money UK, with the most bullish analyst valuing it at UK£2.70 and the most bearish at UK£1.65 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

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 pretty clear that there is an expectation that Virgin Money UK's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 2.5% growth on an annualised basis. This is compared to a historical growth rate of 6.9% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 5.0% annually. Factoring in the forecast slowdown in growth, it seems obvious that Virgin Money UK is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at UK£2.21, with the latest estimates not enough to have an impact on their price targets.

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 Virgin Money UK 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 Virgin Money UK that you should be aware of.

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