Earnings Miss: Arco Platform Limited Missed EPS And Analysts Are Revising Their Forecasts

It's been a sad week for Arco Platform Limited (NASDAQ:ARCE), who've watched their investment drop 10% to US$37.46 in the week since the company reported its quarterly result. It looks like a pretty bad result, given that revenues fell 13% short of analyst estimates at R$209m, and the company reported a statutory loss of R$0.49 per share instead of the profit that the analysts had been forecasting. 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 Arco Platform after the latest results.

See our latest analysis for Arco Platform

Taking into account the latest results, the most recent consensus for Arco Platform from eight analysts is for revenues of R$1.32b in 2021 which, if met, would be a huge 39% increase on its sales over the past 12 months. Statutory earnings per share are predicted to shoot up 705% to R$5.16. Before this earnings report, the analysts had been forecasting revenues of R$1.34b and earnings per share (EPS) of R$5.62 in 2021. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.

The consensus price target held steady at R$281, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Arco Platform, with the most bullish analyst valuing it at R$58.91 and the most bearish at R$44.00 per share. This is a very narrow spread of estimates, implying either that Arco Platform is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. Next year brings more of the same, according to the analysts, with revenue forecast to grow 39%, in line with its 37% annual growth 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 revenues grow 23% per year. So although Arco Platform is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Arco Platform. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster 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.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Arco Platform going out to 2024, and you can see them free on our platform here..

Even so, be aware that Arco Platform is showing 3 warning signs in our investment analysis , you should know about...

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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