Investors in Global Water Resources, Inc. (NASDAQ:GWRS) had a good week, as its shares rose 6.2% to close at US$11.32 following the release of its quarterly results. Although revenues of US$8.2m were in line with analyst expectations, Global Water Resources surprised on the earnings front, with an unexpected (statutory) profit of US$0.02 per share a nice improvement on the losses that the analystforecast. This is an important time for investors, as they can track a company's performance in its report, look at what expert is forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimate to see what could be in store for next year.
Following last week's earnings report, Global Water Resources' one analyst are forecasting 2020 revenues to be US$36.3m, approximately in line with the last 12 months. Per-share earnings are expected to climb 13% to US$0.10. Before this earnings report, the analyst had been forecasting revenues of US$36.4m and earnings per share (EPS) of US$0.06 in 2020. Although the revenue estimates have not really changed, we can see there's been a massive increase in earnings per share expectations, suggesting that the analyst has become more bullish after the latest result.
The average the analyst price target fell 12% to US$12.50, suggesting thatthe analyst has other concerns, and the improved earnings per share outlook was not enough to allay them.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Global Water Resources' past performance and to peers in the same industry. It's pretty clear that there is an expectation that Global Water Resources' revenue growth will slow down substantially, with revenues next year expected to grow 0.9%, compared to a historical growth rate of 2.8% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 7.3% next year. Factoring in the forecast slowdown in growth, it seems obvious that Global Water Resources is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing here is that the analyst upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Global Water Resources following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. The consensus price target fell measurably, with the analyst seemingly not reassured by the latest results, leading to a lower estimate of Global Water Resources' future valuation.
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 analyst estimates for Global Water Resources going out as far as 2022, 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 5 warning signs with Global Water Resources (at least 1 which is a bit concerning) , and understanding these should be part of your investment process.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
If you're looking to trade Global Water Resources, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.