Analysts have issued a financial statement on Capita plc’s half-year report (LON: CPI)


It’s been a poor week for Capital plc (LON:CPI) shareholders, with the stock having fallen 12% to £0.26 in the week since its last interim results. Results look mixed – while revenue was slightly below analysts’ estimates at £1.5bn, statutory earnings were in line with expectations at £0.13 per share. Earnings are an important time for investors because they can follow a company’s performance, watch what analysts predict for the next year, and see if there has been a change in sentiment towards the company. We’ve rounded up the most recent statutory forecasts to see if analysts have changed their earnings models as a result of these results.

See our latest analysis for Capita

LSE: CPI earnings and revenue growth August 10, 2022

After the latest results, the consensus of Capita’s seven analysts is for revenue of £2.88bn in 2022, which would reflect a notable drop in sales of 6.6% from the last year of performance. Earnings are expected to improve with Capita expecting to report statutory profit of £0.007 per share. Looking ahead to this report, analysts had modeled revenue of £2.96 billion and earnings per share (EPS) of £0.009 UK in 2022. From there, we can say that sentiment has definitely turned more bearish after the latest results, resulting in lower earnings forecasts and a fairly large reduction in earnings per share estimates.

Despite earnings forecast cuts, there has been no real change to the UK price target of £0.39, showing that analysts don’t believe the changes will have a significant impact. on its intrinsic value. This is not the only conclusion we can draw from this data, however, as some investors also like to consider the discrepancy in estimates when evaluating analyst price targets. Currently, the most bullish analyst values ​​Capita at £0.50 per share, while the most bearish one values ​​it at £0.22. This is a fairly wide range of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the company.

Looking now at the big picture, one way to understand these forecasts is to see how they compare to both past performance and industry growth estimates. Over the past five years, revenues have declined by approximately 7.2% per year. Worse still, forecasts essentially call for an acceleration of the decline, with an estimate of a 13% annualized decline in revenue through the end of 2022. In contrast, our data suggests that other companies (with hedging of ‘analysts) in a similar sector should see their revenues increase by 15% per year. So it’s pretty clear that while its revenue is down, analysts also expect Capita to suffer more than the industry as a whole.

The essential

The most important thing to remember is that analysts have lowered their earnings per share estimates, which shows that there has been a clear drop in sentiment following these results. On the negative side, they have also lowered their revenue estimates, and the forecast implies that revenue will underperform the industry as a whole. There was no real change from the consensus price target, suggesting that the company’s intrinsic value has not undergone major changes with the latest estimates.

With that in mind, we still believe the longer-term trajectory of the company is much more important for investors to consider. We have estimates – from several Capita analysts – going out to 2024, and you can see them for free on our platform here.

You can also see if Capita is too indebted and if its balance sheet is healthy, for free on our platform here.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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