Investors in DMC Global Inc. (NASDAQ:BOOM) had a good week, as its shares rose 7.7% to close at US$28.60 following the release of its quarterly results. Revenues were in line with expectations, at US$43m, while statutory losses ballooned to US$0.38 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the current consensus, from the three analysts covering DMC Global, is for revenues of US$216.4m in 2020, which would reflect a sizeable 29% reduction in DMC Global's sales over the past 12 months. Losses are predicted to fall substantially, shrinking 339% (on a statutory basis) to US$0.16. In the lead-up to this report, the analysts had been modelling revenues of US$224.7m and earnings per share (EPS) of US$0.20 in 2020. There looks to have been a significant drop in sentiment regarding DMC Global's prospects after these latest results, with a minor downgrade to revenues and the analysts now forecasting a loss instead of a profit.
The consensus price target fell 6.9% to US$31.67, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic DMC Global analyst has a price target of US$33.00 per share, while the most pessimistic values it at US$27.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting DMC Global is an easy business to forecast or the the analysts are all using similar assumptions.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 29%, a significant reduction from annual growth of 21% 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 3.5% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - DMC Global is expected to lag the wider industry.
The Bottom Line
The biggest low-light for us was that the forecasts for DMC Global dropped from profits to a loss next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. 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.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple DMC Global analysts - going out to 2022, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 2 warning signs for DMC Global that you should be aware of.
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.
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