Shareholders might have noticed that Evolution Gaming Group AB (publ) (STO:EVO) filed its quarterly result this time last week. The early response was not positive, with shares down 7.2% to kr631 in the past week. Evolution Gaming Group reported €128m in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of €0.38 beat expectations, being 9.0% higher than what the analysts expected. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
After the latest results, the five analysts covering Evolution Gaming Group are now predicting revenues of €519.0m in 2020. If met, this would reflect a solid 17% improvement in sales compared to the last 12 months. Per-share earnings are expected to shoot up 22% to €1.42. Before this earnings report, the analysts had been forecasting revenues of €515.7m and earnings per share (EPS) of €1.35 in 2020. So the consensus seems to have become somewhat more optimistic on Evolution Gaming Group's earnings potential following these results.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 10% to €68.13. 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 Evolution Gaming Group analyst has a price target of €742 per share, while the most pessimistic values it at €635. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
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 pretty clear that there is an expectation that Evolution Gaming Group's revenue growth will slow down substantially, with revenues next year expected to grow 17%, compared to a historical growth rate of 36% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 19% next year. So it's pretty clear that, while Evolution Gaming Group's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Evolution Gaming Group following these results. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
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 estimates - from multiple Evolution Gaming Group analysts - going out to 2022, and you can see them free on our platform here.
Plus, you should also learn about the 1 warning sign we've spotted with Evolution Gaming Group .
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