The Karooooo Ltd. (NASDAQ:KARO) First-Quarter Results Are Out And Analysts Have Published New Forecasts

As you might know, Karooooo Ltd. (NASDAQ:KARO) recently reported its first-quarter numbers. Results were roughly in line with estimates, with revenues of R626m and statutory earnings per share of R3.49. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for Karooooo

Taking into account the latest results, the consensus forecast from Karooooo's eight analysts is for revenues of R2.68b in 2022, which would reflect a meaningful 13% improvement in sales compared to the last 12 months. Per-share earnings are expected to climb 14% to R16.80. In the lead-up to this report, the analysts had been modelling revenues of R2.66b and earnings per share (EPS) of R16.25 in 2022. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

There's been no major changes to the consensus price target of US$45.39, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Karooooo at US$49.44 per share, while the most bearish prices it at US$42.88. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

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. We can infer from the latest estimates that forecasts expect a continuation of Karooooo'shistorical trends, as the 17% annualised revenue growth to the end of 2022 is roughly in line with the 18% annual revenue growth over the past year. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the industry are forecast to see their revenues grow 14% per year. It's clear that while Karooooo's revenue growth is expected to continue on its current trajectory, it's only expected to grow in line with the industry itself.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Karooooo's earnings potential next year. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Karooooo going out to 2024, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 1 warning sign for Karooooo that you should be aware of.

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