A week ago, Laboratorios Farmaceuticos Rovi, S.A. (BME:ROVI) came out with a strong set of full-year numbers that could potentially lead to a re-rate of the stock. Laboratorios Farmaceuticos Rovi beat earnings, with revenues hitting €381m, ahead of expectations, and statutory earnings per share outperforming analyst reckonings by a solid 15%. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Following the latest results, Laboratorios Farmaceuticos Rovi's five analysts are now forecasting revenues of €400.4m in 2020. This would be a reasonable 5.0% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to crater 24% to €0.54 in the same period. In the lead-up to this report, analysts had been modelling revenues of €403.4m and earnings per share (EPS) of €0.75 in 2020. So there's definitely been a decline in analyst sentiment after the latest results, noting the pretty serious reduction to new EPS forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at €24.41, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Laboratorios Farmaceuticos Rovi, with the most bullish analyst valuing it at €30.50 and the most bearish at €15.50 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. It's pretty clear that analysts expect Laboratorios Farmaceuticos Rovi's revenue growth will slow down substantially, with revenues next year expected to grow 5.0%, compared to a historical growth rate of 8.3% over the past five years. Compare this to the other companies in this market with analyst coverage, which are forecast to grow their revenue at 4.7% per year. Factoring in the forecast slowdown in growth, it looks like analysts are expecting Laboratorios Farmaceuticos Rovi to grow at about the same rate as the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Laboratorios Farmaceuticos Rovi. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider market. The consensus price target held steady at €24.41, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Laboratorios Farmaceuticos Rovi analysts - going out to 2024, and you can see them free on our platform here.
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