Graham Corporation (NYSE:GHM) just released its second-quarter report and things are looking bullish. Statutory revenue and earnings both blasted past expectations, with revenue of US$28m beating expectations by 21% and earnings per share (EPS) reaching US$0.27, some 286% ahead of 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Graham after the latest results.
After the latest results, the three analysts covering Graham are now predicting revenues of US$95.0m in 2021. If met, this would reflect a credible 2.1% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to bounce 99% to US$0.30. In the lead-up to this report, the analysts had been modelling revenues of US$91.3m and earnings per share (EPS) of US$0.17 in 2021. So it seems there's been a definite increase in optimism about Graham's future following the latest results, with a considerable lift to the earnings per share forecasts in particular.
Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$20.67, 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 Graham analyst has a price target of US$27.00 per share, while the most pessimistic values it at US$16.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Graham's past performance and to peers in the same industry. One thing stands out from these estimates, which is that Graham is forecast to grow faster in the future than it has in the past, with revenues expected to grow 2.1%. If achieved, this would be a much better result than the 2.4% annual decline 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 7.5% per year. So although Graham's revenue growth is expected to improve, it is still expected to grow slower than 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 Graham following these results. Fortunately, they also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider industry. The consensus price target held steady at US$20.67, 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 Graham going out to 2022, and you can see them free on our platform here.
You still need to take note of risks, for example - Graham has 2 warning signs we think you should be aware of.
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