Shareholders will be ecstatic, with their stake up 21% over the past week following National CineMedia, Inc.'s (NASDAQ:NCMI) latest annual results. The result was positive overall - although revenues of US$445m were in line with what analysts predicted, National CineMedia surprised by delivering a statutory profit of US$0.46 per share, modestly greater than expected. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on National CineMedia after the latest results.
Taking into account the latest results, the latest consensus from National CineMedia's five analysts is for revenues of US$455.2m in 2020, which would reflect a reasonable 2.3% improvement in sales compared to the last 12 months. Statutory per-share earnings are expected to be US$0.47, roughly flat on the last 12 months. Yet prior to the latest earnings, analysts had been forecasting revenues of US$453.3m and earnings per share (EPS) of US$0.44 in 2020. Analysts seem to have become more bullish on the business, judging by their new earnings per share estimates.
Analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 6.7% to US$9.33. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic National CineMedia analyst has a price target of US$12.00 per share, while the most pessimistic values it at US$7.00. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Further, we can compare these estimates to past performance, and see how National CineMedia forecasts compare to the wider market's forecast performance. It's clear from the latest estimates that National CineMedia's rate of growth is expected to accelerate meaningfully, with forecast 2.3% revenue growth noticeably faster than its historical growth of 1.1%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 4.0% per year. So it's clear that despite the acceleration in growth, National CineMedia is expected to grow meaningfully slower than the market average.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards National CineMedia following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that National CineMedia's revenues are expected to perform worse than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on National CineMedia. 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 National CineMedia going out to 2021, and you can see them free on our platform here..
It might also be worth considering whether National CineMedia's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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