Earnings Beat: Lovisa Holdings Limited Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models
It's been a good week for Lovisa Holdings Limited (ASX:LOV) shareholders, because the company has just released its latest interim results, and the shares gained 4.7% to AU$11.75. The result was positive overall - although revenues of AU$163m were in line with what analysts predicted, Lovisa Holdings surprised by delivering a statutory profit of AU$0.26 per share, modestly greater than expected. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's 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.
View our latest analysis for Lovisa Holdings
Taking into account the latest results, the latest consensus from Lovisa Holdings's six analysts is for revenues of AU$297.7m in 2020, which would reflect a reasonable 6.4% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to dip 6.5% to AU$0.34 in the same period. Before this earnings report, analysts had been forecasting revenues of AU$304.7m and earnings per share (EPS) of AU$0.38 in 2020. From this we can that analyst sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a real cut to earnings per share estimates.
Despite the cuts to forecast earnings, there was no real change to the AU$13.51 price target, showing that analysts don't think the changes have a meaningful impact on the stock's intrinsic value. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Lovisa Holdings at AU$14.50 per share, while the most bearish prices it at AU$11.75. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Lovisa Holdings's past performance and to peers in the same market. It's pretty clear that analysts expect Lovisa Holdings's revenue growth will slow down substantially, with revenues next year expected to grow 6.4%, compared to a historical growth rate of 17% over the past three years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 5.9% next year. So it's pretty clear that, while Lovisa Holdings's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Lovisa Holdings. Analysts also downgraded their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Lovisa Holdings analysts - going out to 2023, and you can see them free on our platform here.
You can also see our analysis of Lovisa Holdings's Board and CEO remuneration and experience, and whether company insiders have been buying stock.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.
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