Last week saw the newest yearly earnings release from Keywords Studios plc (LON:KWS), an important milestone in the company's journey to build a stronger business. It looks like a pretty bad result, all things considered. Although revenues of €326m were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 33% to hit €0.15 per share. The 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the most recent consensus for Keywords Studios from nine analysts is for revenues of €337.5m in 2020 which, if met, would be a satisfactory 3.4% increase on its sales over the past 12 months. Per-share earnings are expected to soar 120% to €0.34. Before this earnings report, the analysts had been forecasting revenues of €350.1m and earnings per share (EPS) of €0.34 in 2020. So it looks like the analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is supposed to maintain EPS.
The average price target was steady at €18.71 even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Keywords Studios at €23.34 per share, while the most bearish prices it at €13.50. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Keywords Studios shareholders.
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. We would highlight that Keywords Studios' revenue growth is expected to slow, with forecast 3.4% increase next year well below the historical 41%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.9% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Keywords Studios.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Even so, long term profitability is more important for the value creation process. The consensus price target held steady at €18.71, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Keywords Studios 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 Keywords Studios that you should be aware of.
If you spot an error that warrants correction, please contact the editor at email@example.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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