Stock Analysis

Earnings Miss: Tracsis plc Missed EPS By 60% And Analysts Are Revising Their Forecasts

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Last week saw the newest annual earnings release from Tracsis plc (LON:TRCS), an important milestone in the company's journey to build a stronger business. It looks like a pretty bad result, all things considered. Although revenues of UK£69m were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 60% to hit UK£0.05 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Tracsis after the latest results.

See our latest analysis for Tracsis

AIM:TRCS Earnings and Revenue Growth November 12th 2022

Taking into account the latest results, the most recent consensus for Tracsis from three analysts is for revenues of UK£76.7m in 2023 which, if met, would be a solid 12% increase on its sales over the past 12 months. Per-share earnings are expected to surge 250% to UK£0.18. In the lead-up to this report, the analysts had been modelling revenues of UK£76.5m and earnings per share (EPS) of UK£0.18 in 2023. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a minor downgrade to their earnings per share forecasts.

The consensus price target held steady at UK£13.68, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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 Tracsis, with the most bullish analyst valuing it at UK£14.30 and the most bearish at UK£13.25 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Tracsis is an easy business to forecast or the the analysts are all using similar assumptions.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Tracsis' past performance and to peers in the same industry. The period to the end of 2023 brings more of the same, according to the analysts, with revenue forecast to display 12% growth on an annualised basis. That is in line with its 11% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 8.1% per year. So although Tracsis is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. 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. The consensus price target held steady at UK£13.68, 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 forecasts for Tracsis going out to 2025, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 1 warning sign for Tracsis that you should be aware of.

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