McGrath RentCorp (NASDAQ:MGRC) investors will be delighted, with the company turning in some strong numbers with its latest results. McGrath RentCorp beat earnings, with revenues hitting US$156m, ahead of expectations, and statutory earnings per share outperforming analyst reckonings by a solid 12%. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on McGrath RentCorp after the latest results.
Taking into account the latest results, McGrath RentCorp's three analysts currently expect revenues in 2021 to be US$579.3m, approximately in line with the last 12 months. Statutory earnings per share are predicted to accumulate 2.6% to US$4.12. Before this earnings report, the analysts had been forecasting revenues of US$580.1m and earnings per share (EPS) of US$4.10 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$76.67. 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 McGrath RentCorp at US$87.00 per share, while the most bearish prices it at US$69.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting McGrath RentCorp is an easy business to forecast or the the analysts are all using similar assumptions.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the McGrath RentCorp's past performance and to peers in the same industry. It's pretty clear that there is an expectation that McGrath RentCorp's revenue growth will slow down substantially, with revenues next year expected to grow 1.5%, compared to a historical growth rate of 8.3% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 6.1% next year. Factoring in the forecast slowdown in growth, it seems obvious that McGrath RentCorp is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that McGrath RentCorp's revenues are expected to perform worse than the wider industry. 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 McGrath RentCorp. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for McGrath RentCorp going out to 2024, 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 1 warning sign with McGrath RentCorp , and understanding this should be part of your investment process.
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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