it’s been a good week for Forterra plc (LON: STRONG), as the company just released its latest half-year results and the stock was up 9.3% to UK £ 1.86. Forterra released results in line with analysts’ forecasts, generating revenue of £ 122million and statutory earnings per share of £ 0.24, suggesting the company is performing well and according to plan. This is an important time for investors, as they can follow a company’s performance in its report, look at experts’ forecasts for next year, and see if there has been a change in the company’s expectations. business. So we’ve collected the latest post-profit statutory consensus estimates to see what might be in store for next year.
See our latest analysis for Forterra
After the latest results, the consensus of Forterra’s nine analysts is for 2020 revenue of £ 273.2million, which would reflect a significant drop in sales of 12% from last year’s performance. The statutory loss per share is expected to decline significantly in the near future, narrowing 1.329% to £ 0.029. Prior to this earnings report, analysts were forecasting revenues of £ 264.0million and earnings per share (EPS) of £ 0.0078 in 2020. Although they improved their revenue figures for the Next year, the consensus also expects losses to increase, possibly due to the investments needed to increase revenues. In any case, it is not clear that these new estimates are particularly bullish.
The consensus price target remained unchanged at UK £ 2.23, appearing to suggest that the higher expected losses should not have a long-term impact on valuation. This is not the only conclusion we can draw from this data, however, as some investors also like to factor in the spread in estimates when evaluating analysts’ price targets. There are a few variations of perception on Forterra, with the most bullish analyst valuing it at UK £ 2.50 and the most bearish at UK £ 1.94 per share. Even so, with a relatively tight grouping of estimates, it appears that analysts are fairly confident in their valuations, suggesting that Forterra is an easy-to-predict company or that analysts all use similar assumptions.
Looking at the big picture now, one of the ways we can understand these forecasts is to compare them to past performance and industry growth estimates. We would like to point out that sales are expected to reverse, with expected revenue decline of 12%, a notable change from the historic growth of 3.2% over the past three years. In contrast, our data suggests that other companies (with analyst coverage) in the same industry are expected to see their revenues grow 5.8% annually for the foreseeable future. It’s pretty clear that Forterra’s revenue is expected to be significantly worse than that of the industry at large.
The bottom line
The most important thing to remember is that analysts expect Forterra to become unprofitable next year. Fortunately, they also improved their revenue estimates, although our data indicates that sales are expected to be worse than those for the industry as a whole. There has been no real change to the consensus price target, suggesting that the intrinsic value of the company has not undergone any major changes with the latest estimates.
With that in mind, we wouldn’t be too quick to draw a conclusion on Forterra. Long-term earning power is much more important than next year’s earnings. We have estimates – from several Forterra analysts – going up to 2023, and you can see them for free on our platform here.
Before proceeding to the next step, you should know the 2 warning signs for Forterra (1 makes us a little uncomfortable!) That we discovered.
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