Yahoo Finance Earnings Miss: Saras S.p.A. Missed EPS By 76% And Analysts Are Revising Their Forecasts
Saras S.p.A. (BIT:SRS) last week reported its latest full-year results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Statutory earnings per share fell badly short of expectations, coming in at €0.028, some 76% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at €9.4b. 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.
See our latest analysis for Saras
Taking into account the latest results, the eight analysts covering Saras provided consensus estimates of €6.07b revenue in 2020, which would reflect a painful 36% decline on its sales over the past 12 months. Earnings are expected to tip over into lossmaking territory, with the analysts forecasting statutory losses of -€0.032 per share in 2020. Before this earnings report, the analysts had been forecasting revenues of €7.40b and earnings per share (EPS) of €0.051 in 2020. So we can see that the consensus has become notably more bearish on Saras' outlook following these results, with a real cut to next year's revenue estimates. Furthermore, they expect the business to be loss-making next year, compared to their previous calls for a profit.
The average price target fell 14% to €1.24, implicitly signalling that lower earnings per share are a leading indicator for Saras' valuation. 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 Saras at €1.85 per share, while the most bearish prices it at €0.87. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 36% revenue decline a notable change from historical growth of 2.5% 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 9.2% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Saras is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analysts are expecting Saras to become unprofitable 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.
With that in mind, we wouldn't be too quick to come to a conclusion on Saras. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Saras going out to 2023, and you can see them free on our platform here..
Plus, you should also learn about the 3 warning signs we've spotted with Saras .
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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