As you might know, ERG S.p.A. (BIT:ERG) recently reported its third-quarter numbers. Revenues were €224m, 10% below analyst expectations, although losses didn't appear to worsen significantly, with a statutory per-share loss of €0.21 being in line with what the analysts anticipated. 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 thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the most recent consensus for ERG from six analysts is for revenues of €1.07b in 2021 which, if met, would be a reasonable 7.0% increase on its sales over the past 12 months. Statutory earnings per share are predicted to bounce 25% to €0.86. In the lead-up to this report, the analysts had been modelling revenues of €1.07b and earnings per share (EPS) of €0.85 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
The analysts reconfirmed their price target of €22.31, showing that the business is executing well and in line with expectations. 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. There are some variant perceptions on ERG, with the most bullish analyst valuing it at €26.40 and the most bearish at €17.00 per share. 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 ERG shareholders.
Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that ERG's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 7.0%, well above its historical decline of 17% a year 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 revenue grow 9.2% per year. So although ERG's revenue growth is expected to improve, it is still expected to grow slower than the industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. 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 estimates - from multiple ERG analysts - going out to 2022, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 3 warning signs for ERG that you need to be mindful of.
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