It's been a mediocre week for HMS Holdings Corp. (NASDAQ:HMSY) shareholders, with the stock dropping 14% to US$24.23 in the week since its latest full-year results. Revenues of US$626m were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$0.98, missing estimates by 5.3%. Following the result, 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. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
View our latest analysis for HMS Holdings
After the latest results, the eight analysts covering HMS Holdings are now predicting revenues of US$711.4m in 2020. If met, this would reflect a solid 14% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to reduce 8.2% to US$0.92 in the same period. In the lead-up to this report, analysts had been modelling revenues of US$719.8m and earnings per share (EPS) of US$0.98 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share forecasts for next year.
The average analyst price target fell 6.2% to US$35.00, with reduced earnings forecasts clearly tied to a lower valuation estimate. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values HMS Holdings at US$43.00 per share, while the most bearish prices it at US$30.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await HMS Holdings shareholders.
In addition, we can look to HMS Holdings'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 HMS Holdings's growth to accelerate, with the forecast 14% growth ranking favourably alongside historical growth of 7.5% per annum over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 14% per year. HMS Holdings is expected to grow at about the same rate as its market, so it's not clear that we can draw any conclusions from its growth relative to competitors.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for HMS Holdings. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of HMS Holdings's future valuation.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for HMS Holdings going out to 2024, and you can see them free on our platform here.
You can also see whether HMS Holdings is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
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February 24, 2020 at 11:17PM
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Earnings Miss: HMS Holdings Corp. Missed EPS By 5.3% And Analysts Are Revising Their Forecasts - Yahoo Finance
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