Burford Capital Limited Just Missed EPS By 22%: Here's What Analysts Think Will Happen Next

It's shaping up to be a tough period for Burford Capital Limited (LON:BUR), which a week ago released some disappointing annual results that could have a notable impact on how the market views the stock. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at US$345m, statutory earnings missed forecasts by an incredible 22%, coming in at just US$0.78 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. 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 Burford Capital

Taking into account the latest results, the consensus forecast from Burford Capital's four analysts is for revenues of US$382.6m in 2021, which would reflect a solid 11% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to jump 47% to US$1.15. Before this earnings report, the analysts had been forecasting revenues of US$382.6m and earnings per share (EPS) of US$0.85 in 2021. Although the revenue estimates have not really changed, we can see there's been a very substantial lift in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.

There's been no major changes to the consensus price target of US$14.08, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on 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 Burford Capital, with the most bullish analyst valuing it at US$16.31 and the most bearish at US$6.46 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Burford Capital's revenue growth will slow down substantially, with revenues to the end of 2021 expected to display 11% growth on an annualised basis. This is compared to a historical growth rate of 19% over the past five years. Compare this to the 13 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 12% per year. Factoring in the forecast slowdown in growth, it looks like Burford Capital is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Burford Capital following these results. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. The consensus price target held steady at US$14.08, with the latest estimates not enough to have an impact on their price targets.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Burford Capital 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 1 warning sign with Burford Capital , and understanding this should be part of your investment process.

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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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