Earnings Update: Here's Why Analysts Just Lifted Their NZME Limited (NZSE:NZM) Price Target To NZ$0.99

Last week, you might have seen that NZME Limited (NZSE:NZM) released its annual result to the market. The early response was not positive, with shares down 6.7% to NZ$0.83 in the past week. The result was fairly weak overall, with revenues of NZ$322m being 3.6% less than what the analyst had been modelling. Earnings are an important time for investors, as they can track a company's performance, look at what the analyst is forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analyst latest (statutory) post-earnings forecasts for next year.

View our latest analysis for NZME

Following the latest results, NZME's sole analyst are now forecasting revenues of NZ$346.5m in 2021. This would be an okay 7.6% improvement in sales compared to the last 12 months. Per-share earnings are expected to jump 31% to NZ$0.097. Before this earnings report, the analyst had been forecasting revenues of NZ$346.6m and earnings per share (EPS) of NZ$0.098 in 2021. So it's pretty clear that, although the analyst has updated their estimates, there's been no major change in expectations for the business following the latest results.

With the analyst reconfirming their revenue and earnings forecasts, it's surprising to see that the price target rose 24% to NZ$0.99. It looks as though they previously had some doubts over whether the business would live up to their expectations.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the NZME's past performance and to peers in the same industry. For example, we noticed that NZME's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 7.6%, well above its historical decline of 4.5% a year over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 4.0% next year. Not only are NZME's revenues expected to improve, it seems that the analyst is also expecting it to grow faster than the wider 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 analyst holding their earnings forecasts steady, in line with previous estimates. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analyst clearly feeling that the intrinsic value of the business is improving.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At least one analyst has provided forecasts out to 2023, which can be seen for free on our platform here.

It might also be worth considering whether NZME's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.

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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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