Results: The Sage Group plc Beat Earnings Expectations And Analysts Now Have New Forecasts

The interim results for The Sage Group plc (LON:SGE) were released last week, making it a good time to revisit its performance. Revenues were UK£934m, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at UK£0.15, an impressive 39% ahead of estimates. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Sage Group

Following the latest results, Sage Group's 19 analysts are now forecasting revenues of UK£1.93b in 2022. This would be a reasonable 4.5% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to descend 16% to UK£0.24 in the same period. Before this earnings report, the analysts had been forecasting revenues of UK£1.93b and earnings per share (EPS) of UK£0.25 in 2022. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.

It might be a surprise to learn that the consensus price target was broadly unchanged at UK£7.98, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Sage Group analyst has a price target of UK£10.95 per share, while the most pessimistic values it at UK£5.90. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's clear from the latest estimates that Sage Group's rate of growth is expected to accelerate meaningfully, with the forecast 9.1% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 2.1% 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 12% per year. So it's clear that despite the acceleration in growth, Sage Group is expected to grow meaningfully slower than the industry average.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Sage Group. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse 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.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Sage Group going out to 2024, and you can see them free on our platform here.

Before you take the next step you should know about the 1 warning sign for Sage Group that we have uncovered.

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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.