There's been a notable change in appetite for Serko Limited (NZSE:SKO) shares in the week since its full-year report, with the stock down 16% to NZ$4.05. The result was fairly weak overall, with revenues of NZ$18m being 9.3% less than what the analysts had been modelling. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus from Serko's six analysts is for revenues of NZ$40.8m in 2023, which would reflect a substantial 129% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 26% to NZ$0.22. Yet prior to the latest earnings, the analysts had been forecasting revenues of NZ$51.9m and losses of NZ$0.16 per share in 2023. So there's been quite a change-up of views after the recent consensus updates, withthe analysts making a serious cut to their revenue outlook while also expecting losses per share to increase.
The average price target was broadly unchanged at NZ$6.34, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Serko analyst has a price target of NZ$8.95 per share, while the most pessimistic values it at NZ$4.50. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Serko's past performance and to peers in the same industry. One thing stands out from these estimates, which is that Serko is forecast to grow faster in the future than it has in the past, with revenues expected to display 129% annualised growth until the end of 2023. If achieved, this would be a much better result than the 0.7% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 17% per year. So it looks like Serko is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The most important thing to take away is that the analysts increased their loss per share estimates for next year. They also downgraded their revenue estimates, although industry data suggests that Serko's revenues are expected to grow faster than the wider industry. The consensus price target held steady at NZ$6.34, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Serko analysts - 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 3 warning signs with Serko , 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.