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PlayAGS, Inc. (NYSE:AGS) defied analyst predictions to release its third-quarter results, which were ahead of market expectations. The results were impressive, with revenues of US$49m exceeding analyst forecasts by 34%, and statutory losses of US$0.31 were likewise much smaller than the analysts had forecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following last week's earnings report, PlayAGS' eight analysts are forecasting 2021 revenues to be US$228.8m, approximately in line with the last 12 months. Losses are predicted to fall substantially, shrinking 38% to US$1.07. Before this earnings announcement, the analysts had been modelling revenues of US$239.0m and losses of US$1.01 per share in 2021. Overall it looks as though the analysts are negative in this update. Although sales forecasts held steady, the consensus also made a to its losses per share forecasts.
The average price target was broadly unchanged at US$5.64, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. 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 PlayAGS analyst has a price target of US$8.50 per share, while the most pessimistic values it at US$3.00. 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.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that PlayAGS' revenue growth will slow down substantially, with revenues next year expected to grow 0.2%, compared to a historical growth rate of 18% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 22% next 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 PlayAGS.
The Bottom Line
The most important thing to take away is that the analysts increased their loss per share estimates for next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. 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.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple PlayAGS analysts - going out to 2022, and you can see them free on our platform here.
You still need to take note of risks, for example - PlayAGS has 2 warning signs we think you should be aware of.
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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