VSE Corporation (NASDAQ:VSEC) just released its latest quarterly results and things are looking bullish. It was overall a positive result, with revenues beating expectations by 7.6% to hit US$165m. VSE also reported a statutory profit of US$0.42, which was an impressive 29% above what the analysts had forecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are 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 analysts latest (statutory) post-earnings forecasts for next year.
After the latest results, the four analysts covering VSE are now predicting revenues of US$684.8m in 2021. If met, this would reflect a satisfactory 3.5% improvement in sales compared to the last 12 months. VSE is also expected to turn profitable, with statutory earnings of US$2.79 per share. Before this earnings report, the analysts had been forecasting revenues of US$684.8m and earnings per share (EPS) of US$2.79 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
The analysts reconfirmed their price target of US$55.67, showing that the business is executing well and in line with expectations. 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. Currently, the most bullish analyst values VSE at US$55.00 per share, while the most bearish prices it at US$52.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting VSE is an easy business to forecast or the the analysts are all using similar assumptions.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that VSE's rate of growth is expected to accelerate meaningfully, with the forecast 4.7% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 2.3% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 7.2% per year. It seems obvious that, while the future growth outlook is brighter than the recent past, VSE is expected to grow slower than the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that VSE's revenues are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple VSE analysts - going out to 2022, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 2 warning signs for VSE (1 can't be ignored!) that you need to be mindful of.
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