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Karat Packaging Inc. Just Beat EPS By 24%: Here's What Analysts Think Will Happen Next

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Karat Packaging Inc. (NASDAQ:KRT) just released its first-quarter report and things are looking bullish. It was overall a positive result, with revenues beating expectations by 3.9% to hit US$105m. Karat Packaging also reported a statutory profit of US$0.34, which was an impressive 24% above what the analysts had 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.

See our latest analysis for Karat Packaging

earnings-and-revenue-growth
earnings-and-revenue-growth

Taking into account the latest results, the current consensus from Karat Packaging's three analysts is for revenues of US$436.9m in 2022, which would reflect a meaningful 11% increase on its sales over the past 12 months. Statutory earnings per share are predicted to increase 5.0% to US$1.36. Before this earnings report, the analysts had been forecasting revenues of US$430.7m and earnings per share (EPS) of US$1.36 in 2022. 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.

There were no changes to revenue or earnings estimates or the price target of US$31.00, suggesting that the company has met expectations in its recent result. 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. The most optimistic Karat Packaging analyst has a price target of US$33.00 per share, while the most pessimistic values it at US$29.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Karat Packaging's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 15% growth on an annualised basis. This is compared to a historical growth rate of 24% over the past three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.1% annually. So it's pretty clear that, while Karat Packaging's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

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. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster 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 Karat Packaging. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Karat Packaging analysts - going out to 2024, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Karat Packaging that you should be aware of.

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

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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