Last week, you might have seen that TPI Composites, Inc. (NASDAQ:TPIC) released its yearly result to the market. The early response was not positive, with shares down 4.3% to US$22.82 in the past week. The results overall were pretty much dead in line with analyst forecasts; revenues were US$1.4b and statutory losses were US$0.45 per share. 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. So we gathered the latest post-earnings forecasts to see what analysts’ statutory forecasts suggest is in store for next year.
Taking into account the latest results, the latest consensus from TPI Composites’s ten analysts is for revenues of US$1.56b in 2020, which would reflect a decent 8.8% improvement in sales compared to the last 12 months. Earnings are expected to improve, with TPI Composites forecast to report a statutory profit of US$0.57 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of US$1.56b and earnings per share (EPS) of US$0.74 in 2020. Analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a pretty serious reduction to EPS estimates.
Although analysts have revised their earnings forecasts for next year, they’ve also lifted the consensus price target 6.3% to US$28.50, suggesting the revised estimates are not indicative of a weaker long-term future for the business. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values TPI Composites at US$37.00 per share, while the most bearish prices it at US$24.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
In addition, we can look to TPI Composites’s past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. We would highlight that TPI Composites’s revenue growth is expected to slow, with forecast 8.8% increase next year well below the historical 22%p.a. growth over the last five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 2.9% next year. So it’s pretty clear that, while TPI Composites’s revenue growth is expected to slow, it’s still expected to grow faster than the market itself.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for TPI Composites. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
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 TPI Composites analysts – going out to 2022, and you can see them free on our platform here.
You can also see whether TPI Composites is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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