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Earnings Beat: Proto Labs, Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

Proto Labs, Inc. (NYSE:PRLB) just released its second-quarter report and things are looking bullish. The company beat both earnings and revenue forecasts, with revenue of US$107m, some 3.4% above estimates, and statutory earnings per share (EPS) coming in at US$0.47, 50% ahead of expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Proto Labs after the latest results.

See our latest analysis for Proto Labs

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Taking into account the latest results, the six analysts covering Proto Labs provided consensus estimates of US$434.0m revenue in 2020, which would reflect a noticeable 3.8% decline on its sales over the past 12 months. Statutory earnings per share are expected to nosedive 20% to US$1.74 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$428.5m and earnings per share (EPS) of US$1.44 in 2020. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the great increase in earnings per share expectations following these results.

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There's been no major changes to the consensus price target of US$110, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. 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 Proto Labs, with the most bullish analyst valuing it at US$145 and the most bearish at US$74.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 3.8%, a significant reduction from annual growth of 14% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 7.5% next year. It's pretty clear that Proto Labs' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Proto Labs' 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 Proto Labs' 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 Proto Labs. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Proto Labs analysts - going out to 2022, and you can see them free on our platform here.

Plus, you should also learn about the 3 warning signs we've spotted with Proto Labs (including 1 which shouldn't be ignored) .

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.