Analysts made a financial statement on Guidewire Software, Inc.’s first quarter report (NYSE: GWRE)

As you may know, Guidewire Software, Inc. (NYSE: GWRE) just released its latest first quarter results with very strong numbers. Both earnings and losses per share were better than expected, with earnings of US $ 170 million estimated at 3.2%. Statutory losses were lower than analysts’ expectations, reaching US $ 0.24 per share. Profits are an important time for investors because they can follow a company’s performance, look at what analysts are forecasting for next year, and see if there has been a change in sentiment towards the company. We thought readers would find it interesting to see analysts’ latest (statutory) post-earnings forecasts for next year.

Check out our latest review for Guidewire Software

NYSE: GWRE Profit and Revenue Growth December 11, 2020

Following the recent earnings report, the consensus of 13 analysts covering Guidewire Software projects revenues of US $ 729.8 million in 2021, implying a slight 3.3% decline in sales from the past 12 months. Losses per share are expected to explode, reaching US $ 1.39 per share. Yet before the latest results, analysts were forecasting revenues of US $ 730.5 million and losses of US $ 1.43 per share in 2021. So there appears to have been a moderate improvement in analyst sentiment with the latest consensus release, given the shift to loss per share forecast for this year.

There has been no major change to the consensus price target of US $ 128, suggesting that reduced loss estimates are not sufficient to have a positive long-term impact on the stock’s valuation. Sticking to a single price target can be unwise, however, as the consensus target is actually the average of analysts’ price targets. As a result, some investors like to look at the range of estimates to see if there are any differing opinions on the valuation of the company. There are a few variations of perceptions on Guidewire Software, with the most bullish analyst valuing it at US $ 150 and the most bearish at US $ 88.00 per share. As you can see, not all analysts agree on the stock’s future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not entirely unpredictable.

Looking at the big picture now, one of the ways to make sense of these forecasts is to see how they stack up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with expected revenue decline of 3.3%, a significant reduction from the annual growth of 14% over the past five years. In contrast, our data suggests that other companies (with analyst coverage) in the same industry are expected to see their revenues grow by 14% per year for the foreseeable future. So while its revenue is expected to decline, this cloud has no bright side – Guidewire Software is expected to lag behind the industry at large.

The bottom line

The most obvious conclusion is that analysts have not changed their forecast for loss next year. On the positive side, there has been no major change in income estimates; although forecasts imply that revenues will outperform the industry as a whole. The consensus price target has not really changed, suggesting that the intrinsic value of the company has not undergone any major changes with the latest estimates.

Continuing on from this reflection, we believe that the company’s long-term outlook is much more relevant than next year’s results. At Simply Wall St, we have a full range of analyst estimates for Guidewire Software through 2023, and you can view them for free on our platform here.

We don’t want to rain too much on the parade, but we also found 1 warning sign for Guidewire software that you need to be aware of.

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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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