Investors in Ag Growth International Inc. (TSE:AFN) had a good week, as its shares rose 2.1% to close at CA$46.11 following the release of its third-quarter results. Things were not great overall, with a surprise loss of CA$0.15 per share on revenues of CA$261m, even though analysts had been expecting a profit. Following the result, 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. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.
Taking into account the latest results, the current consensus from Ag Growth International's six analysts is for revenues of CA$1.13b in 2020, which would reflect a notable 15% increase on its sales over the past 12 months. Earnings per share are expected to jump 66% to CA$3.22. In the lead-up to this report, analysts had been modelling revenues of CA$1.13b and earnings per share (EPS) of CA$3.23 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.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at CA$58.50. 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 Ag Growth International, with the most bullish analyst valuing it at CA$62.00 and the most bearish at CA$55.00 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.
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. It's pretty clear that analysts expect Ag Growth International's revenue growth will slow down substantially, with revenues next year expected to grow 15%, compared to a historical growth rate of 22% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 11% next year. So it's pretty clear that, while Ag Growth International's revenue growth is expected to slow, it's still expected to grow faster than the market itself.
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 - and our data does suggest that Ag Growth International's revenues are expected to grow faster than the wider market. 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.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Ag Growth International analysts - going out to 2023, and you can see them free on our platform here.
You can also view our analysis of Ag Growth International's balance sheet, and whether we think Ag Growth International is carrying too much debt, for free on our platform here.
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