PagSeguro Digital Ltd. (NYSE:PAGS) shareholders are probably feeling a little disappointed, since its shares fell 5.5% to US$58.06 in the week after its latest annual results. PagSeguro Digital reported in line with analyst predictions, delivering revenues of R$6.8b and statutory earnings per share of R$3.92, suggesting the business is executing well and in line with its plan. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the most recent consensus for PagSeguro Digital from twelve analysts is for revenues of R$9.56b in 2021 which, if met, would be a huge 40% increase on its sales over the past 12 months. Statutory earnings per share are predicted to jump 50% to R$5.88. Yet prior to the latest earnings, the analysts had been anticipated revenues of R$9.31b and earnings per share (EPS) of R$6.04 in 2021. Overall it looks as though the analysts were a bit mixed on the latest results. Although there was a a huge to revenue, the consensus also made a minor downgrade to its earnings per share forecasts.
The analysts also upgraded PagSeguro Digital's price target 6.2% to R$330, implying that the higher sales are expected to generate enough value to offset the forecast decline in earnings. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic PagSeguro Digital analyst has a price target of R$74.56 per share, while the most pessimistic values it at R$23.78. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting PagSeguro Digital is an easy business to forecast or the the analysts are all using similar assumptions.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We can infer from the latest estimates that forecasts expect a continuation of PagSeguro Digital'shistorical trends, as next year's 40% revenue growth is roughly in line with 39% annual revenue growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 14% per year. So although PagSeguro Digital is expected to maintain its revenue growth rate, it's definitely expected 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 PagSeguro Digital. Happily, they also upgraded their revenue estimates, and are forecasting revenues 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 PagSeguro Digital. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for PagSeguro Digital going out to 2025, and you can see them free on our platform here..
Before you take the next step you should know about the 2 warning signs for PagSeguro Digital that we have uncovered.
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