Savers Value Village, Inc. Just Missed EPS By 67%: Here's What Analysts Think Will Happen Next

It's been a sad week for Savers Value Village, Inc. (NYSE:SVV), who've watched their investment drop 12% to US$8.78 in the week since the company reported its second-quarter result. Statutory earnings per share fell badly short of expectations, coming in at US$0.06, some 67% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at US$387m. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Savers Value Village

Following last week's earnings report, Savers Value Village's eight analysts are forecasting 2024 revenues to be US$1.54b, approximately in line with the last 12 months. Per-share earnings are expected to soar 121% to US$0.52. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.57b and earnings per share (EPS) of US$0.62 in 2024. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a real cut to EPS estimates.

The average price target fell 23% to US$14.13, with reduced earnings forecasts clearly tied to a lower valuation estimate. 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 Savers Value Village analyst has a price target of US$22.00 per share, while the most pessimistic values it at US$10.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Savers Value Village's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 3.4% growth on an annualised basis. This is compared to a historical growth rate of 9.4% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 11% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Savers Value Village.

The Bottom Line

The most important thing to take away is that the 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 forecasts imply they will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

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 Savers Value Village going out to 2026, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Savers Value Village (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.