The third-quarter results for Dye & Durham Limited (TSE:DND) were released last week, making it a good time to revisit its performance. Revenues came in well ahead of expectations at CA$69m, although statutory earnings per share fell badly short. Dye & Durham reported a loss of CA$0.16 per share, whereas the analysts had previously expected a profit. 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.
After the latest results, the four analysts covering Dye & Durham are now predicting revenues of CA$344.8m in 2022. If met, this would reflect a sizeable 149% improvement in sales compared to the last 12 months. Dye & Durham is also expected to turn profitable, with statutory earnings of CA$0.98 per share. Before this earnings report, the analysts had been forecasting revenues of CA$341.2m and earnings per share (EPS) of CA$1.02 in 2022. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at CA$56.20, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on 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. Currently, the most bullish analyst values Dye & Durham at CA$60.00 per share, while the most bearish prices it at CA$55.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong 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. The analysts are definitely expecting Dye & Durham's growth to accelerate, with the forecast 107% annualised growth to the end of 2022 ranking favourably alongside historical growth of 35% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 8.9% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Dye & Durham is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at CA$56.20, with the latest estimates not enough to have an impact on their price targets.
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 forecasts for Dye & Durham going out to 2023, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Dye & Durham , and understanding this should be part of your investment process.
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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