There's been a major selloff in Dorel Industries Inc. (TSE:DII.B) shares in the week since it released its full-year report, with the stock down 37% to CA$1.95. It looks like the results were pretty good overall. While revenues of US$2.6b were in line with analyst predictions, statutory losses were much smaller than expected, with Dorel Industries losing US$0.32 per share. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
After the latest results, the three analysts covering Dorel Industries are now predicting revenues of US$2.71b in 2020. If met, this would reflect a reasonable 2.7% improvement in sales compared to the last 12 months. Earnings are expected to improve, with Dorel Industries forecast to report a statutory profit of US$0.72 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of US$2.71b and earnings per share (EPS) of US$0.72 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
The consensus price target fell -31% to US$3.84, suggesting that analysts might have been a bit enthusiastic in their previous valuation - or they were expecting the company to provide stronger guidance in the annual results. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Dorel Industries, with the most bullish analyst valuing it at US$5.75 and the most bearish at US$5.30 per share. 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.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. For example, we noticed that Dorel Industries's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow at 2.7%, well above its historical decline of 0.6% a year over the past five years. Compare this against analyst estimates for the wider market, which suggest that (in aggregate) market revenues are expected to grow 5.4% next year. Although Dorel Industries's revenues are expected to improve, it seems that analysts are still bearish on the business, forecasting it to grow slower than the wider market.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Dorel Industries's revenues are expected to perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Dorel Industries's future valuation.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Dorel Industries going out to 2021, and you can see them free on our platform here..
You can also see whether Dorel Industries is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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