Vertex, Inc. (NASDAQ:VERX) came out with its quarterly results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. It was a workmanlike result, with revenues of US$105m coming in 5.4% ahead of expectations, and statutory earnings per share of US$0.01, in line with analyst appraisals. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
After the latest results, the seven analysts covering Vertex are now predicting revenues of US$415.8m in 2021. If met, this would reflect a satisfactory 4.6% improvement in sales compared to the last 12 months. Vertex is also expected to turn profitable, with statutory earnings of US$0.04 per share. Before this earnings report, the analysts had been forecasting revenues of US$411.9m and earnings per share (EPS) of US$0.06 in 2021. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a pretty serious reduction to EPS estimates.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$25.83, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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. There are some variant perceptions on Vertex, with the most bullish analyst valuing it at US$35.00 and the most bearish at US$16.00 per share. 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 Vertex's revenue growth will slow down substantially, with revenues to the end of 2021 expected to display 9.5% growth on an annualised basis. This is compared to a historical growth rate of 14% over the past year. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 14% annually. Factoring in the forecast slowdown in growth, it seems obvious that Vertex is also expected to grow slower than other industry participants.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Vertex. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider 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.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Vertex going out to 2023, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 2 warning signs for Vertex you should be aware of.
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