Potbelly Corporation (NASDAQ:PBPB) just released its latest quarterly report and things are not looking great. It was a pretty negative result overall, with revenues of US$73m missing analyst predictions by 9.7%. Worse, the business reported a statutory loss of US$0.56 per share, much larger than the analysts had forecast prior to the result. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Potbelly after the latest results.
Taking into account the latest results, the most recent consensus for Potbelly from three analysts is for revenues of US$342.4m in 2021 which, if met, would be a satisfactory 7.6% increase on its sales over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 70% to US$0.63. Before this earnings announcement, the analysts had been modelling revenues of US$361.3m and losses of US$0.60 per share in 2021. Overall it looks as though the analysts are negative in this update. Although sales forecasts held steady, the consensus also made a to its losses per share forecasts.
The average price target was broadly unchanged at US$2.63, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. 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 Potbelly, with the most bullish analyst valuing it at US$3.00 and the most bearish at US$2.25 per share. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. For example, we noticed that Potbelly's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 7.6%, well above its historical decline of 0.3% a year over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 23% next year. Although Potbelly's revenues are expected to improve, it seems that the analysts are still bearish on the business, forecasting it to grow slower than the wider industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Potbelly. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at US$2.63, with the latest estimates not enough to have an impact on their price targets.
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 forecasts for Potbelly going out to 2022, and you can see them free on our platform here.
Plus, you should also learn about the 3 warning signs we've spotted with Potbelly .
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