UK£2.63 - That's What Analysts Think NCC Group plc (LON:NCC) Is Worth After These Results

Investors in NCC Group plc (LON:NCC) had a good week, as its shares rose 8.3% to close at UK£2.68 following the release of its interim results. It was a credible result overall, with revenues of UK£136m and statutory earnings per share of UK£0.042 both in line with analyst estimates, showing that NCC Group is executing in line with expectations. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

View our latest analysis for NCC Group

After the latest results, the eight analysts covering NCC Group are now predicting revenues of UK£276.3m in 2021. If met, this would reflect a reasonable 3.6% improvement in sales compared to the last 12 months. Per-share earnings are expected to soar 33% to UK£0.06. Yet prior to the latest earnings, the analysts had been anticipated revenues of UK£272.0m and earnings per share (EPS) of UK£0.052 in 2021. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the substantial gain in earnings per share expectations following these results.

The consensus price target rose 14% to UK£2.63, suggesting that higher earnings estimates flow through to the stock's valuation as well. 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. Currently, the most bullish analyst values NCC Group at UK£3.25 per share, while the most bearish prices it at UK£1.83. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

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. We would highlight that NCC Group's revenue growth is expected to slow, with forecast 3.6% increase next year well below the historical 6.9%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 8.9% per year. Factoring in the forecast slowdown in growth, it seems obvious that NCC Group is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards NCC Group following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that NCC Group's revenues are expected to perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on NCC Group. Long-term earnings power is much more important than next year's profits. We have forecasts for NCC Group going out to 2023, and you can see them free on our platform here.

You still need to take note of risks, for example - NCC Group has 3 warning signs we think you should be aware of.

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This article by Simply Wall St is general in nature. 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.
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