Perion Network Ltd. (NASDAQ:PERI) just released its quarterly report and things are looking bullish. The company beat both earnings and revenue forecasts, with revenue of US$83m, some 5.6% above estimates, and statutory earnings per share (EPS) coming in at US$0.08, 45% ahead of expectations. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Perion Network after the latest results.
Following the latest results, Perion Network's four analysts are now forecasting revenues of US$323.2m in 2021. This would be a notable 12% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to drop 19% to US$0.22 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$317.8m and earnings per share (EPS) of US$0.28 in 2021. So there's definitely been a decline in sentiment after the latest results, noting the pretty serious reduction to new EPS forecasts.
Althoughthe analysts have revised their earnings forecasts for next year, they've also lifted the consensus price target 7.1% to US$10.00, suggesting the revised estimates are not indicative of a weaker long-term future for the business. 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. There are some variant perceptions on Perion Network, with the most bullish analyst valuing it at US$11.00 and the most bearish at US$9.00 per share. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Perion Network's rate of growth is expected to accelerate meaningfully, with the forecast 12% revenue growth noticeably faster than its historical growth of 0.4%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 4.7% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Perion Network 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 Perion Network. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly 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 Perion Network. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Perion Network analysts - going out to 2022, and you can see them free on our platform here.
It is also worth noting that we have found 2 warning signs for Perion Network that you need to take into consideration.
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