Investors in Prosus N.V. (AMS:PRX) had a good week, as its shares rose 3.9% to close at €92.24 following the release of its half-year results. Prosus beat revenue forecasts by a solid 17% to hit US$2.2b. Statutory earnings per share came in at US$2.26, in line with expectations. 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. 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 consensus forecast from Prosus' 13 analysts is for revenues of US$4.28b in 2021, which would reflect a credible 4.8% improvement in sales compared to the last 12 months. Per-share earnings are expected to swell 10% to US$2.95. Before this earnings report, the analysts had been forecasting revenues of US$3.96b and earnings per share (EPS) of US$2.66 in 2021. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a decent improvement in earnings per share in particular.
Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of €113, suggesting that the forecast performance does not have a long term impact on the company's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Prosus analyst has a price target of €135 per share, while the most pessimistic values it at €83.00. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Prosus' past performance and to peers in the same industry. It's pretty clear that there is an expectation that Prosus' revenue growth will slow down substantially, with revenues next year expected to grow 4.8%, compared to a historical growth rate of 43% over the past year. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 21% next year. Factoring in the forecast slowdown in growth, it seems obvious that Prosus is also expected to grow slower than other industry participants.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Prosus' earnings potential next year. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider industry. The consensus price target held steady at US$113, 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 Prosus going out to 2024, and you can see them free on our platform here.
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