Yahoo Finance Softchoice Corporation Just Missed Earnings; Here's What Analysts Are Forecasting Now
Shareholders might have noticed that Softchoice Corporation (TSE:SFTC) filed its quarterly result this time last week. The early response was not positive, with shares down 7.8% to CA$16.78 in the past week. It looks like a pretty bad result, given that revenues fell 16% short of analyst estimates at US$170m, and the company reported a statutory loss of US$0.02 per share instead of the profit that the analysts had been forecasting. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
View our latest analysis for Softchoice
Taking into account the latest results, Softchoice's three analysts currently expect revenues in 2024 to be US$777.2m, approximately in line with the last 12 months. Statutory earnings per share are forecast to dip 6.1% to US$0.63 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$839.4m and earnings per share (EPS) of US$0.80 in 2024. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a large cut to earnings per share estimates.
The consensus price target fell 6.2% to CA$20.58, with the weaker earnings outlook clearly leading valuation estimates. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Softchoice analyst has a price target of CA$24.98 per share, while the most pessimistic values it at CA$17.99. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
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. One thing that stands out from these estimates is that shrinking revenues are expected to moderate over the period ending 2024 compared to the historical decline of 2.2% per annum over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 6.3% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Softchoice to suffer worse than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Softchoice. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Softchoice going out to 2026, and you can see them free on our platform here.
Before you take the next step you should know about the 4 warning signs for Softchoice (1 is a bit concerning!) that we have uncovered.
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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.
