Yahoo Finance Gear4music (Holdings) plc Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next
Investors in Gear4music (Holdings) plc (LON:G4M) had a good week, as its shares rose 7.0% to close at UK£10.00 following the release of its annual results. It looks like a credible result overall - although revenues of UK£157m were what the analysts expected, Gear4music (Holdings) surprised by delivering a (statutory) profit of UK£0.60 per share, an impressive 88% above what was forecast. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Check out our latest analysis for Gear4music (Holdings)
Following last week's earnings report, Gear4music (Holdings)'s three analysts are forecasting 2022 revenues to be UK£156.2m, approximately in line with the last 12 months. Statutory earnings per share are expected to nosedive 52% to UK£0.29 in the same period. In the lead-up to this report, the analysts had been modelling revenues of UK£157.4m and earnings per share (EPS) of UK£0.21 in 2022. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the very substantial lift in earnings per share expectations following these results.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 16% to UK£6.50. 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 Gear4music (Holdings), with the most bullish analyst valuing it at UK£10.00 and the most bearish at UK£3.00 per share. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
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. We would highlight that sales are expected to reverse, with a forecast 0.8% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 26% 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 7.2% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Gear4music (Holdings) is expected to lag the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Gear4music (Holdings) following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Gear4music (Holdings)'s revenues are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Gear4music (Holdings) going out to 2024, and you can see them free on our platform here..
Plus, you should also learn about the 1 warning sign we've spotted with Gear4music (Holdings) .
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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