It's been a good week for Integrated Research Limited (ASX:IRI) shareholders, because the company has just released its latest interim results, and the shares gained 3.4% to AU$3.06. The result was positive overall - although revenues of AU$53m were in line with what analysts predicted, Integrated Research surprised by delivering a statutory profit of AU$0.069 per share, modestly greater than expected. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the most recent consensus for Integrated Research from twin analysts is for revenues of AU$108.3m in 2020, which is a modest 4.5% increase on its sales over the past 12 months. Statutory earnings per share are expected to accumulate 8.8% to AU$0.14. In the lead-up to this report, analysts had been modelling revenues of AU$107.9m and earnings per share (EPS) of AU$0.13 in 2020. So the consensus seems to have become somewhat more optimistic on Integrated Research's earnings potential following these results.
Analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 8.6% to AU$3.09.
Further, we can compare these estimates to past performance, and see how Integrated Research forecasts compare to the wider market's forecast performance. It's pretty clear that analysts expect Integrated Research's revenue growth will slow down substantially, with revenues next year expected to grow 4.5%, compared to a historical growth rate of 8.5% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 20% per year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Integrated Research to grow slower than the wider market.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Integrated Research following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Integrated Research's revenues are expected to perform worse than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on Integrated Research. Long-term earnings power is much more important than next year's profits. At least one analyst has provided forecasts out to 2022, which can be seen for free on our platform here.
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