Globant S.A. (NYSE:GLOB) 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. Results overall were respectable, with statutory earnings of US$0.53 per share roughly in line with what the analysts had forecast. Revenues of US$270m came in 4.0% ahead of analyst predictions. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the consensus forecast from Globant's nine analysts is for revenues of US$1.15b in 2021, which would reflect a huge 28% improvement in sales compared to the last 12 months. Per-share earnings are expected to soar 45% to US$2.32. Before this earnings report, the analysts had been forecasting revenues of US$1.07b and earnings per share (EPS) of US$2.32 in 2021. So it looks like there's been no major change in sentiment following the latest results, although the analysts have made a small increase to to revenue forecasts.
Even though revenue forecasts increased, there was no change to the consensus price target of US$237, suggesting the analysts are focused on earnings as the driver of value creation. 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. Currently, the most bullish analyst values Globant at US$245 per share, while the most bearish prices it at US$221. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Globant's rate of growth is expected to accelerate meaningfully, with the forecast 40% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 23% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 14% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Globant to grow faster than the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster 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.
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 estimates - from multiple Globant analysts - going out to 2025, 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 1 warning sign with Globant , and understanding it should be part of your investment process.
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