Cairn Homes plc Just Beat EPS By 29%: Here's What Analysts Think Will Happen Next

Cairn Homes plc (LON:CRN) just released its latest annual results and things are looking bullish. It was overall a positive result, with revenues beating expectations by 6.9% to hit €262m. Cairn Homes also reported a statutory profit of €0.017, which was an impressive 29% above what the analysts had forecast. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Cairn Homes after the latest results.

See our latest analysis for Cairn Homes

After the latest results, the seven analysts covering Cairn Homes are now predicting revenues of €371.8m in 2021. If met, this would reflect a substantial 42% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to soar 124% to €0.038. Yet prior to the latest earnings, the analysts had been anticipated revenues of €376.5m and earnings per share (EPS) of €0.039 in 2021. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a small dip in their earnings per share forecasts.

It might be a surprise to learn that the consensus price target was broadly unchanged at €1.21, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Cairn Homes analyst has a price target of €1.12 per share, while the most pessimistic values it at €0.78. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Cairn Homes' past performance and to peers in the same industry. We can infer from the latest estimates that forecasts expect a continuation of Cairn Homes'historical trends, as the 42% annualised revenue growth to the end of 2021 is roughly in line with the 37% annual revenue 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 9.2% per year. So although Cairn Homes is expected to maintain its revenue growth rate, it's definitely expected to grow faster 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, 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. 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 Cairn Homes. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Cairn Homes 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 Cairn Homes that you should be aware of.

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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.
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