Investors in Marshalls plc (LON:MSLH) had a good week, as its shares rose 4.6% to close at UK£7.16 following the release of its yearly results. Statutory earnings per share fell badly short of expectations, coming in at UK£0.012, some 76% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at UK£469m. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Marshalls after the latest results.
Following the latest results, Marshalls' six analysts are now forecasting revenues of UK£527.9m in 2021. This would be a decent 12% improvement in sales compared to the last 12 months. Per-share earnings are expected to leap 2,033% to UK£0.25. In the lead-up to this report, the analysts had been modelling revenues of UK£520.0m and earnings per share (EPS) of UK£0.23 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
There's been no major changes to the consensus price target of UK£7.88, 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 Marshalls analyst has a price target of UK£8.80 per share, while the most pessimistic values it at UK£6.90. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that Marshalls' rate of growth is expected to accelerate meaningfully, with the forecast 12% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 6.2% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 8.2% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Marshalls is expected to grow much faster than its industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Marshalls' earnings potential next year. 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.
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 Marshalls analysts - going out to 2023, and you can see them free on our platform here.
Before you take the next step you should know about the 3 warning signs for Marshalls (1 is potentially serious!) that we have uncovered.
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