Australian Clinical Labs Limited (ASX:ACL) shareholders are probably feeling a little disappointed, since its shares fell 7.9% to AU$4.88 in the week after its latest yearly results. Revenues were in line with forecasts, at AU$996m, although statutory earnings per share came in 10% below what the analysts expected, at AU$0.88 per share. 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 gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following the recent earnings report, the consensus from five analysts covering Australian Clinical Labs is for revenues of AU$753.7m in 2023, implying a concerning 24% decline in sales compared to the last 12 months. Statutory earnings per share are expected to nosedive 66% to AU$0.30 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of AU$748.3m and earnings per share (EPS) of AU$0.31 in 2023. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
With no major changes to earnings forecasts, the consensus price target fell 8.3% to AU$5.30, suggesting that the analysts might have previously been hoping for an earnings upgrade. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Australian Clinical Labs, with the most bullish analyst valuing it at AU$5.70 and the most bearish at AU$4.50 per share. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
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. We would highlight that sales are expected to reverse, with a forecast 24% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 20% 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 2.4% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Australian Clinical Labs is expected to lag the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Australian Clinical Labs' revenues are expected to perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Australian Clinical Labs' future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on Australian Clinical Labs. 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 Australian Clinical Labs going out to 2025, 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 Australian Clinical Labs (at least 1 which shouldn't be ignored) , and understanding these should be part of your investment process.
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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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