Investors in Alpha Financial Markets Consulting plc (LON:AFM) had a good week, as its shares rose 6.2% to close at UK£2.05 following the release of its half-yearly results. Earnings per share of UK£0.088 unfortunately missed expectations by 15%, although it was encouraging to see revenues of UK£42m exceed expectations by 3.4%. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the latest consensus from Alpha Financial Markets Consulting's three analysts is for revenues of UK£89.2m in 2020, which would reflect a meaningful 12% improvement in sales compared to the last 12 months. Earnings per share are expected to jump 76% to UK£0.14. In the lead-up to this report, analysts had been modelling revenues of UK£92.1m and earnings per share (EPS) of UK£0.12 in 2020. While revenue forecasts have been revised downwards, analysts look to have become more optimistic on the company's earnings power, given the nice increase in to earnings per share forecasts.
The consensus has made no major changes to the price target of UK£3.40, suggesting the forecast improvement in earnings is expected to offset the decline in revenues next year. 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. Currently, the most bullish analyst values Alpha Financial Markets Consulting at UK£3.70 per share, while the most bearish prices it at UK£2.80. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
In addition, we can look to Alpha Financial Markets Consulting's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. Analysts are definitely expecting Alpha Financial Markets Consulting's growth to accelerate, with the forecast 12% growth ranking favourably alongside historical growth of 4.2% per annum over the past year. Compare this with other companies in the same market, which are forecast to grow their revenue 5.1% next year. It seems obvious that, while the growth outlook is brighter than the recent past, analysts also expect Alpha Financial Markets Consulting to grow faster than the wider market.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around Alpha Financial Markets Consulting's earnings potential next year. Unfortunately analysts also downgraded their revenue estimates, although industry data suggests that Alpha Financial Markets Consulting's revenues are expected to grow faster than the wider market. Still, earnings per share are more important to value creation for shareholders. The consensus price target held steady at UK£3.40, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Alpha Financial Markets Consulting going out to 2024, and you can see them free on our platform here.
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