Clover Corporation Limited (ASX:CLV) came out with its annual results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. It was not a great result overall. While revenues of AU$88m were in line with analyst predictions, earnings were less than expected, missing statutory estimates by 11% to hit AU$0.074 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.
Following the latest results, Clover's dual analysts are now forecasting revenues of AU$94.3m in 2021. This would be a credible 6.8% improvement in sales compared to the last 12 months. Per-share earnings are expected to shoot up 25% to AU$0.078. Before this earnings report, the analysts had been forecasting revenues of AU$100.0m and earnings per share (EPS) of AU$0.083 in 2021. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the minor downgrade to earnings per share expectations.
The analysts made no major changes to their price target of AU$2.69, suggesting the downgrades are not expected to have a long-term impact on Clover's valuation.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Clover's revenue growth is expected to slow, with forecast 6.8% increase next year well below the historical 20%p.a. growth over the last five years. Compare this to the 24 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 5.9% per year. So it's pretty clear that, while Clover's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Clover. Sadly, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the industry itself. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Clover. Long-term earnings power is much more important than next year's profits. We have analyst estimates for Clover going out as far as 2023, and you can see them free on our platform here.
You can also view our analysis of Clover's balance sheet, and whether we think Clover is carrying too much debt, for free on our platform here.
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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