As you might know, MACA Limited (ASX:MLD) recently reported its half-year numbers. The result was positive overall – although revenues of AU$364m were in line with what analysts predicted, MACA surprised by delivering a statutory profit of AU$0.076 per share, modestly greater than expected. Following the result, 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. We thought readers would find it interesting to see analysts’ latest (statutory) post-earnings forecasts for next year.
Check out our latest analysis for MACA
ASX:MLD Past and Future Earnings, February 25th 2020
Taking into account the latest results, the latest consensus from MACA’s three analysts is for revenues of AU$770.7m in 2020, which would reflect a meaningful 9.3% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to accumulate 5.7% to AU$0.097. In the lead-up to this report, analysts had been modelling revenues of AU$769.6m and earnings per share (EPS) of AU$0.12 in 2020. So there’s definitely been a decline in analyst sentiment after the latest results, noting the substantial drop in new EPS forecasts.
The consensus price target held steady at AU$1.19, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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. The most optimistic MACA analyst has a price target of AU$1.33 per share, while the most pessimistic values it at AU$1.09. The narrow spread of estimates could suggest that the business’ future is relatively easy to value, or that analysts have a clear view on its prospects.
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. It’s clear from the latest estimates that MACA’s rate of growth is expected to accelerate meaningfully, with forecast 9.3% revenue growth noticeably faster than its historical growth of 4.8%p.a. over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 0.8% next year. It seems obvious that, while the growth outlook is brighter than the recent past, analysts also expect MACA to grow faster than 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 MACA. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – and our data does suggest that MACA’s revenues are expected to grow faster than the wider market. The consensus price target held steady at AU$1.19, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
With that in mind, we wouldn’t be too quick to come to a conclusion on MACA. 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 MACA going out to 2022, and you can see them free on our platform here..