A week ago, Charles & Colvard, Ltd. (NASDAQ:CTHR) came out with a strong set of second-quarter numbers that could potentially lead to a re-rate of the stock. The company beat both earnings and revenue forecasts, with revenue of US$12m, some 7.5% above estimates, and statutory earnings per share (EPS) coming in at US$0.09, 200% ahead of expectations. This is an important time for investors, as they can track a company's performance in its report, look at what expert is 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 analyst has changed their mind on Charles & Colvard after the latest results.
Taking into account the latest results, the most recent consensus for Charles & Colvard from sole analyst is for revenues of US$33.6m in 2021 which, if met, would be a decent 8.4% increase on its sales over the past 12 months. Charles & Colvard is also expected to turn profitable, with statutory earnings of US$0.06 per share. Before this earnings report, the analyst had been forecasting revenues of US$33.6m and earnings per share (EPS) of US$0.06 in 2021. The consensus analyst doesn't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
With the analyst reconfirming their revenue and earnings forecasts, it's surprising to see that the price target rose 80% to US$2.70. It looks as though they previously had some doubts over whether the business would live up to their expectations.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Charles & Colvard's rate of growth is expected to accelerate meaningfully, with the forecast 8.4% revenue growth noticeably faster than its historical growth of 3.4%p.a. over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 10% per year. Charles & Colvard is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analyst reconfirming that the business is performing in line with their previous earnings per share estimates. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as 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. We have analyst estimates for Charles & Colvard going out as far as 2022, and you can see them free on our platform here.
Before you take the next step you should know about the 2 warning signs for Charles & Colvard that we have uncovered.
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