Last week, you might have seen that Grand Canyon Education, Inc. (NASDAQ:LOPE) released its yearly result to the market. The early response was not positive, with shares down 6.0% to US$82.23 in the past week. It was a credible result overall, with revenues of US$779m and statutory earnings per share of US$5.37 both in line with analyst estimates, showing that Grand Canyon Education is executing in line with expectations. This is an important time for investors, as they can track a company’s performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see analysts’ latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the current consensus from Grand Canyon Education’s three analysts is for revenues of US$855.9m in 2020, which would reflect a notable 9.9% increase on its sales over the past 12 months. Statutory earnings per share are expected to rise 2.7% to US$5.57. Before this earnings report, analysts had been forecasting revenues of US$858.2m and earnings per share (EPS) of US$5.71 in 2020. So it looks like there’s been a small decline in overall sentiment after the recent results – there’s been no major change to revenue estimates, but analysts did make a small dip in their earnings per share forecasts.
The consensus price target held steady at US$116, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. The most optimistic Grand Canyon Education analyst has a price target of US$125 per share, while the most pessimistic values it at US$106. The narrow spread of estimates could suggest that the business’ future is relatively easy to value, or that analysts have a clear view on its prospects.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. It’s clear from the latest estimates that Grand Canyon Education’s rate of growth is expected to accelerate meaningfully, with forecast 9.9% revenue growth noticeably faster than its historical growth of 2.2%p.a. over the past five years. Compare this with other companies in the same market, which are forecast to see a revenue decline of 18% next year. So it’s clear that despite the acceleration in growth, Grand Canyon Education is expected to grow meaningfully slower than the market average.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$116, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
With that in mind, we wouldn’t be too quick to come to a conclusion on Grand Canyon Education. Long-term earnings power is much more important than next year’s profits. At Simply Wall St, we have a full range of analyst estimates for Grand Canyon Education going out to 2021, and you can see them free on our platform here..
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
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