Quarterhill Inc. (TSE:QTRH) just released its latest quarterly report and things are not looking great. Statutory earnings fell substantially short of expectations, with revenues of CA$44m missing forecasts by 28%. Losses exploded, with a per-share loss of CA$0.21 some 790% below prior forecasts. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Quarterhill after the latest results.
After the latest results, the five analysts covering Quarterhill are now predicting revenues of CA$327.4m in 2022. If met, this would reflect a meaningful 9.2% improvement in sales compared to the last 12 months. Per-share earnings are expected to expand 10% to CA$0.21. Yet prior to the latest earnings, the analysts had been anticipated revenues of CA$359.3m and earnings per share (EPS) of CA$0.45 in 2022. The analysts seem less optimistic after the recent results, reducing their sales forecasts and making a large cut to earnings per share numbers.
It'll come as no surprise then, to learn that the analysts have cut their price target 15% to CA$2.93. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Quarterhill at CA$4.00 per share, while the most bearish prices it at CA$2.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
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. It's clear from the latest estimates that Quarterhill's rate of growth is expected to accelerate meaningfully, with the forecast 19% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 7.0% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 7.7% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Quarterhill to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Quarterhill analysts - going out to 2023, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 2 warning signs for Quarterhill you should know about.
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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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