The shareholders of Racine, Inc. (NASDAQ: ROOT) had a terrible week, stocks slumped 24% to US $ 13.49 in the week following its latest full year results. Root beat revenue forecast by a solid 17% to hit US $ 402 million. Statutory losses also exploded, with the loss per share reaching US $ 4.81, 23% more than analysts expected. Profits are an important time for investors because they can follow a company’s performance, look at what analysts are forecasting for next year, and see if there has been a change in sentiment towards the company. So we’ve collected the latest post-profit statutory consensus estimates to see what might be in store for next year.
Check out our latest analysis for Root
Based on the latest results, the seven analysts covering Root provided consensus estimates of $ 273.4 million in revenue in 2021, which would reflect a worrying 32% drop in sales in the past 12 months. Losses are expected to drop significantly, falling 67% to US $ 2.71. Prior to this earnings announcement, analysts had modeled revenues of US $ 249.2 million and losses of US $ 2.20 per share in 2021. While earnings estimates for this year have increased, there are also had a very substantial increase in loss per share expectations, suggesting that the consensus has been a bit mixed on the stock.
The consensus price target remained unchanged at US $ 21.92, appearing to suggest that the higher expected losses should not have a long-term impact on valuation. There is another way to think about price targets, however, and that is to look at the range of price targets offered by analysts, as a wide range of estimates might suggest a different view of the possible outcomes for the market. business. There are variations of perception on Root, with the most bullish analyst valuing it at US $ 30.00 and the most bearish at US $ 13.00 per share. Notice the wide gap in analysts’ price targets? This implies for us that there is a fairly wide range of possible scenarios for the underlying activity.
Another way to look at these estimates is in the context of the bigger picture, such as how the forecast compares to past performance and whether the forecast is more or less bullish relative to other companies in the industry. We would like to point out that sales are expected to reverse, with forecasted revenue decline of 32%, a notable change from the historic growth of 76% over the past year. Compare that with our data, which suggests other companies in the same industry are expected to see their revenues increase 3.2% overall next year. So while its revenue is expected to decline, this cloud has no bright side – Root is expected to lag behind the industry at large.
The bottom line
The most important thing to remember is that analysts have increased their estimates of loss per share for the next year. They have also improved their revenue estimates for next year, although sales are expected to grow more slowly than the industry as a whole. The consensus price target has not really changed, suggesting that the intrinsic value of the company has not undergone any major changes with the latest estimates.
With that in mind, we wouldn’t be too quick to draw a conclusion on Root. Long-term earning power is much more important than next year’s earnings. We have estimates – from several Root analysts – up to 2025, and you can see them for free on our platform here.
Before proceeding to the next step, you should know the 4 warning signs for Root (2 make us uncomfortable!) That we discovered.
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