It's been a good week for Cascades Inc. (TSE:CAS) shareholders, because the company has just released its latest full-year results, and the shares gained 3.4% to CA$16.79. Revenues were CA$5.2b, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at CA$2.02, an impressive 28% ahead of estimates. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the consensus forecast from Cascades' six analysts is for revenues of CA$5.30b in 2021, which would reflect a satisfactory 2.7% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to fall 12% to CA$1.82 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of CA$5.26b and earnings per share (EPS) of CA$1.71 in 2021. So the consensus seems to have become somewhat more optimistic on Cascades' earnings potential following these results.
The consensus price target was unchanged at CA$19.64, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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 Cascades at CA$22.50 per share, while the most bearish prices it at CA$18.00. This is a very narrow spread of estimates, implying either that Cascades is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Cascades' revenue growth is expected to slow, with forecast 2.7% increase next year well below the historical 6.4%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 3.8% next year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Cascades.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Cascades' earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Cascades' 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.
With that in mind, we wouldn't be too quick to come to a conclusion on Cascades. Long-term earnings power is much more important than next year's profits. We have forecasts for Cascades going out to 2024, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 3 warning signs for Cascades (1 shouldn't be ignored!) that you should be aware of.
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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