Target Healthcare REIT PLC Earnings Missed Analyst Estimates: Here's What Analysts Are Forecasting Now

Shareholders might have noticed that Target Healthcare REIT PLC (LON:THRL) filed its yearly result this time last week. The early response was not positive, with shares down 9.5% to UK£0.81 in the past week. Target Healthcare REIT beat revenue forecasts by a solid 12% to hit UK£64m. Statutory earnings per share fell 15% short of expectations, at UK£0.082. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Our analysis indicates that THRL is potentially undervalued!

Taking into account the latest results, the consensus forecast from Target Healthcare REIT's four analysts is for revenues of UK£68.2m in 2023, which would reflect a reasonable 6.8% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to fall 10% to UK£0.071 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of UK£68.2m and earnings per share (EPS) of UK£0.11 in 2023. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a pretty serious reduction to EPS estimates.

It might be a surprise to learn that the consensus price target was broadly unchanged at UK£1.04, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Target Healthcare REIT analyst has a price target of UK£1.10 per share, while the most pessimistic values it at UK£0.95. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Target Healthcare REIT's revenue growth is expected to slow, with the forecast 6.8% annualised growth rate until the end of 2023 being well below the historical 19% 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) 5.8% annually. So it's pretty clear that, while Target Healthcare REIT's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Target Healthcare REIT. 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£1.04, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Target Healthcare REIT. 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 Target Healthcare REIT going out to 2025, and you can see them free on our platform here..

Plus, you should also learn about the 1 warning sign we've spotted with Target Healthcare REIT .

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.