It's been a good week for TT Electronics plc (LON:TTG) shareholders, because the company has just released its latest interim results, and the shares gained 4.7% to UK£2.79. It was a workmanlike result, with revenues of UK£236m coming in 4.6% ahead of expectations, and statutory earnings per share of UK£0.008, in line with analyst appraisals. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the current consensus from TT Electronics' seven analysts is for revenues of UK£479.8m in 2021, which would reflect an okay 4.9% increase on its sales over the past 12 months. Per-share earnings are expected to jump 26% to UK£0.074. In the lead-up to this report, the analysts had been modelling revenues of UK£464.4m and earnings per share (EPS) of UK£0.085 in 2021. While next year's revenue estimates increased, there was also a substantial drop in EPS expectations, suggesting the consensus has a bit of a mixed view of these results.
There's been no major changes to the price target of UK£2.94, suggesting that the impact of higher forecast sales and lower earnings won't result in a meaningful change to the business' 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 TT Electronics analyst has a price target of UK£3.50 per share, while the most pessimistic values it at UK£2.25. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await TT Electronics shareholders.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the TT Electronics' past performance and to peers in the same industry. It's clear from the latest estimates that TT Electronics' rate of growth is expected to accelerate meaningfully, with the forecast 10% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 5.9% 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 7.6% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that TT Electronics is expected to grow much faster than its industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for TT Electronics. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. The consensus price target held steady at UK£2.94, 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 TT Electronics. 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 TT Electronics going out to 2023, and you can see them free on our platform here..
Even so, be aware that TT Electronics is showing 2 warning signs in our investment analysis , and 1 of those is concerning...
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