Donnelley Financial Solutions, Inc. (NYSE:DFIN) just released its latest quarterly results and things are looking bullish. Donnelley Financial Solutions beat earnings, with revenues hitting US$210m, ahead of expectations, and statutory earnings per share outperforming analyst reckonings by a solid 19%. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
See our latest analysis for Donnelley Financial Solutions
Taking into account the latest results, the current consensus, from the five analysts covering Donnelley Financial Solutions, is for revenues of US$739.4m in 2021, which would reflect an uncomfortable 15% reduction in Donnelley Financial Solutions' sales over the past 12 months. Per-share earnings are expected to shoot up 108% to US$1.03. In the lead-up to this report, the analysts had been modelling revenues of US$735.6m and earnings per share (EPS) of US$0.92 in 2021. Although the revenue estimates have not really changed, we can see there's been a nice increase in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.
The consensus price target rose 13% to US$16.30, suggesting that higher earnings estimates flow through to the stock's valuation as well. 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. Currently, the most bullish analyst values Donnelley Financial Solutions at US$22.00 per share, while the most bearish prices it at US$11.50. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. Over the past five years, revenues have declined around 3.9% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 15% decline in revenue next year. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 5.4% next year. So while a broad number of companies are forecast to decline, unfortunately Donnelley Financial Solutions is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Donnelley Financial Solutions' earnings potential next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Donnelley Financial Solutions going out to 2023, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 4 warning signs for Donnelley Financial Solutions (1 is concerning) you should be aware of.
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. 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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