Yahoo Finance Softcat plc Just Beat Revenue Estimates By 27%
Softcat plc ( LON:SCT ) just released its interim report and things are looking bullish. Statutory revenue and earnings both blasted past expectations, with revenue of UK£771m beating expectations by 27% and earnings per share (EPS) reaching UK£0.26, some 23% ahead of expectations. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Check out our latest analysis for Softcat
After the latest results, the consensus from Softcat's seven analysts is for revenues of UK£1.31b in 2022, which would reflect a measurable 2.6% decline in revenue compared to the last year of performance. Statutory per share are forecast to be UK£0.52, approximately in line with the last 12 months. In the lead-up to this report, the analysts had been modelling revenues of UK£1.24b and earnings per share (EPS) of UK£0.49 in 2022. So there seems to have been a moderate uplift in sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.
Despite these upgrades,the analysts have not made any major changes to their price target of UK£19.27, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Softcat analyst has a price target of UK£23.50 per share, while the most pessimistic values it at UK£14.00. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
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. These estimates imply that revenue is expected to slow, with a forecast annualised revenue decline of 5.2% by the end of 2022. This indicates a significant reduction from annual growth of 11% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 12% per year. It's pretty clear that Softcat's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Softcat following these results. They also upgraded their revenue estimates for next year, even though revenue is expected to grow slower than the wider industry. The consensus price target held steady at UK£19.27, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Softcat. 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 Softcat going out to 2024, and you can see them free on our platform here. .
We don't want to rain on the parade too much, but we did also find 1 warning sign for Softcat that you need to be mindful of.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
