The investors in Card Factory plc's (LON:CARD) will be rubbing their hands together with glee today, after the share price leapt 36% to UK£0.49 in the week following its yearly results. Revenues of UK£452m were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at UK£0.15, missing estimates by 7.3%. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Card Factory after the latest results.
Following the recent earnings report, the consensus from five analysts covering Card Factory is for revenues of UK£313.6m in 2021, implying a substantial 31% decline in sales compared to the last 12 months. Statutory earnings per share are expected to dive 76% to UK£0.036 in the same period. Before this earnings report, the analysts had been forecasting revenues of UK£321.0m and earnings per share (EPS) of UK£0.054 in 2021. The analysts seem less optimistic after the recent results, reducing their sales forecasts and making a pretty serious reduction to earnings per share numbers.
The consensus price target fell 7.6% to UK£0.85, with the weaker earnings outlook clearly leading valuation estimates. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Card Factory analyst has a price target of UK£1.45 per share, while the most pessimistic values it at UK£0.45. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast revenue decline of 31%, a significant reduction from annual growth of 4.8% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 3.9% next year. It's pretty clear that Card Factory's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Card Factory going out to 2023, and you can see them free on our platform here..
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Card Factory (at least 1 which is a bit unpleasant) , and understanding these should be part of your investment process.
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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.