A week ago, SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) came out with a strong set of quarterly numbers that could potentially lead to a re-rate of the stock. The company beat both earnings and revenue forecasts, with revenue of US$1.2b, some 2.2% above estimates, and statutory earnings per share (EPS) coming in at US$0.60, 21% ahead of expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
After the latest results, the 14 analysts covering SS&C Technologies Holdings are now predicting revenues of US$4.77b in 2021. If met, this would reflect an okay 2.1% improvement in sales compared to the last 12 months. Per-share earnings are expected to increase 4.5% to US$2.33. In the lead-up to this report, the analysts had been modelling revenues of US$4.78b and earnings per share (EPS) of US$2.29 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$70.53. 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. There are some variant perceptions on SS&C Technologies Holdings, with the most bullish analyst valuing it at US$78.00 and the most bearish at US$57.00 per share. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that SS&C Technologies Holdings' revenue growth will slow down substantially, with revenues next year expected to grow 2.1%, compared to a historical growth rate of 34% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 13% per 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 SS&C Technologies Holdings.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will 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 SS&C Technologies Holdings. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for SS&C Technologies Holdings going out to 2024, 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 2 warning signs with SS&C Technologies Holdings (at least 1 which is potentially serious) , and understanding these 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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