EMIS Group plc (LON:EMIS) last week reported its latest annual results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. EMIS Group reported UK£159m in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of UK£0.48 beat expectations, being 3.6% higher than what the analysts expected. 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 gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the four analysts covering EMIS Group are now predicting revenues of UK£164.3m in 2021. If met, this would reflect an okay 3.0% improvement in sales compared to the last 12 months. Statutory per share are forecast to be UK£0.49, approximately in line with the last 12 months. Before this earnings report, the analysts had been forecasting revenues of UK£164.3m and earnings per share (EPS) of UK£0.47 in 2021. So the consensus seems to have become somewhat more optimistic on EMIS Group's earnings potential following these results.
There's been no major changes to the consensus price target of UK£12.51, 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. The most optimistic EMIS Group analyst has a price target of UK£13.50 per share, while the most pessimistic values it at UK£11.52. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
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 EMIS Group's rate of growth is expected to accelerate meaningfully, with the forecast 3.0% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 0.009% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 32% per year. It seems obvious that, while the future growth outlook is brighter than the recent past, EMIS Group is expected to grow slower than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around EMIS Group's earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that EMIS Group's revenues are expected to perform worse than the wider industry. The consensus price target held steady at UK£12.51, 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 estimates - from multiple EMIS Group analysts - going out to 2023, and you can see them free on our platform here.
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