The quarterly results for Park Lawn Corporation (TSE:PLC) were released last week, making it a good time to revisit its performance. It looks like a pretty bad result, all things considered. Although revenues of CA$74m were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 48% to hit CA$0.25 per share. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the most recent consensus for Park Lawn from nine analysts is for revenues of CA$293.4m in 2020 which, if met, would be a notable 14% increase on its sales over the past 12 months. Statutory earnings per share are predicted to leap 297% to CA$0.58. In the lead-up to this report, the analysts had been modelling revenues of CA$297.0m and earnings per share (EPS) of CA$1.08 in 2020. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a large cut to EPS estimates.
It might be a surprise to learn that the consensus price target was broadly unchanged at CA$26.30, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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 Park Lawn analyst has a price target of CA$30.00 per share, while the most pessimistic values it at CA$24.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Park Lawn is an easy business to forecast or the the analysts are all using similar assumptions.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Park Lawn's past performance and to peers in the same industry. We would highlight that Park Lawn's revenue growth is expected to slow, with forecast 14% increase next year well below the historical 44%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 20% per year. Factoring in the forecast slowdown in growth, it seems obvious that Park Lawn is also expected to grow slower than other industry participants.
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. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Park Lawn's revenues are expected to perform worse than the wider industry. 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.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Park Lawn analysts - going out to 2021, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 5 warning signs for Park Lawn you should know about.
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