CareTech Holdings PLC Just Missed EPS By 18%: Here's What Analysts Think Will Happen Next

Investors in CareTech Holdings PLC (LON:CTH) had a good week, as its shares rose 7.4% to close at UK£5.24 following the release of its full-year results. It was not a great result overall. While revenues of UK£430m were in line with analyst predictions, earnings were less than expected, missing statutory estimates by 18% to hit UK£0.22 per share. 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 CareTech Holdings

Taking into account the latest results, the consensus forecast from CareTech Holdings' five analysts is for revenues of UK£461.4m in 2021, which would reflect an okay 7.3% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to grow 15% to UK£0.26. In the lead-up to this report, the analysts had been modelling revenues of UK£462.9m and earnings per share (EPS) of UK£0.42 in 2021. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a large cut to EPS estimates.

It might be a surprise to learn that the consensus price target was broadly unchanged at UK£6.23, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values CareTech Holdings at UK£6.85 per share, while the most bearish prices it at UK£5.81. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that CareTech Holdings' revenue growth is expected to slow, with forecast 7.3% increase next year well below the historical 29%p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 6.0% next year. Factoring in the forecast slowdown in growth, it looks like CareTech Holdings is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for CareTech Holdings. 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 UK£6.23, 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. We have estimates - from multiple CareTech Holdings analysts - going out to 2025, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 2 warning signs for CareTech Holdings that you need to be mindful of.

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