It’s been a mediocre week for Super Group (SGHC) Limited (NYSE:SGHC) shareholders, with the stock dropping 15% to US$9.30 in the week since its latest yearly results. Revenues of €1.3b fell slightly short of expectations, but earnings were a definite bright spot, with statutory per-share profits of €4.06 an impressive 882% ahead of estimates. 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. We’ve gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
See our latest analysis for Super Group (SGHC)
Following the latest results, Super Group (SGHC)’s three analysts are now forecasting revenues of €1.42b in 2022. This would be a satisfactory 7.7% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to sink 18% to €0.39 in the same period. Before this earnings report, the analysts had been forecasting revenues of €1.52b and earnings per share (EPS) of €0.44 in 2022. It’s pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a small dip in earnings per share estimates.
Despite the cuts to forecast earnings, there was no real change to the US$13.25 price target, showing that the analysts don’t think the changes have a meaningful impact on its intrinsic value. 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 Super Group (SGHC) analyst has a price target of US$14.00 per share, while the most pessimistic values it at US$12.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Super Group (SGHC) is an easy business to forecast or the the analysts are all using similar assumptions.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Super Group (SGHC)’s revenue growth is expected to slow, with the forecast 7.7% annualised growth rate until the end of 2022 being well below the historical 45% growth over the last year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 17% per year. Factoring in the forecast slowdown in growth, it seems obvious that Super Group (SGHC) is also expected to grow slower than other industry participants.
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. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. 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 Super Group (SGHC). Long-term earnings power is much more important than next year’s profits. We have estimates – from multiple Super Group (SGHC) analysts – going out to 2023, 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 Super Group (SGHC) , 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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