Results: Tomra Systems ASA Beat Earnings Expectations And Analysts Now Have New Forecasts
Shareholders of Tomra Systems ASA (OB:TOM) will be pleased this week, given that the stock price is up 15% to kr334 following its latest yearly results. Tomra Systems reported kr9.3b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of kr5.57 beat expectations, being 5.8% higher than what analysts expected. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
See our latest analysis for Tomra Systems
Taking into account the latest results, the latest consensus from Tomra Systems's four analysts is for revenues of kr9.82b in 2020, which would reflect a satisfactory 5.1% improvement in sales compared to the last 12 months. Statutory per share are forecast to be kr5.60, approximately in line with the last 12 months. Yet prior to the latest earnings, analysts had been forecasting revenues of kr9.79b and earnings per share (EPS) of kr5.82 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a small dip in their earnings per share forecasts.
The consensus price target held steady at kr285, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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. There are some variant perceptions on Tomra Systems, with the most bullish analyst valuing it at kr384 and the most bearish at kr240 per share. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Tomra Systems's past performance and to peers in the same market. It's pretty clear that analysts expect Tomra Systems's revenue growth will slow down substantially, with revenues next year expected to grow 5.1%, compared to a historical growth rate of 13% over the past five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 4.6% next year. Factoring in the forecast slowdown in growth, it looks like analysts are expecting Tomra Systems to grow at about the same rate as the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall 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.
With that in mind, we wouldn't be too quick to come to a conclusion on Tomra Systems. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Tomra Systems analysts - going out to 2022, and you can see them free on our platform here.
It might also be worth considering whether Tomra Systems's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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