RWS Holdings plc Just Recorded A 9.5% EPS Beat: Here's What Analysts Are Forecasting Next
Last week, you might have seen that RWS Holdings plc (LON:RWS) released its full-year result to the market. The early response was not positive, with shares down 7.0% to UK£6.22 in the past week. RWS Holdings reported UK£356m in revenue, roughly in line with analyst forecasts, although earnings per share (EPS) of UK£0.16 beat expectations, being 9.5% 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. Readers will be glad to know we've aggregated the latest forecasts to see whether analysts have changed their mind on RWS Holdings after the latest results.
Check out our latest analysis for RWS Holdings
Taking into account the latest results, the most recent consensus for RWS Holdings from three analysts is for revenues of UK£380.1m in 2020, which is an okay 6.8% increase on its sales over the past 12 months. Earnings per share are expected to decrease 2.4% to UK£0.16 in the same period. In the lead-up to this report, analysts had been modelling revenues of UK£379.5m and earnings per share (EPS) of UK£0.22 in 2020. So there's definitely been a decline in analyst sentiment after the latest results, noting the large cut to new EPS forecasts.
The consensus price target held steady at UK£6.37, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values RWS Holdings at UK£7.40 per share, while the most bearish prices it at UK£6.00. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
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 RWS Holdings's revenue growth will slow down substantially, with revenues next year expected to grow 6.8%, compared to a historical growth rate of 32% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 5.0% next year. So it's pretty clear that, while RWS Holdings's revenue growth is expected to slow, it's still expected to grow faster than the market itself.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for RWS Holdings. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. The consensus price target held steady at UK£6.37, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for RWS Holdings going out to 2024, and you can see them free on our platform here.
You can also view our analysis of RWS Holdings's balance sheet, and whether we think RWS Holdings is carrying too much debt, for free on our 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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