Public Companies
AAN

Results: The Aaron's Company, Inc. Exceeded Expectations And The Consensus Has Updated Its Estimates

The Aaron's Company, Inc. (NYSE:AAN) investors will be delighted, with the company turning in some strong numbers with its latest results. Aaron's Company delivered a significant beat to revenue and earnings per share (EPS) expectations, with sales hitting US$481m, some 12% above indicated. Statutory EPS were US$1.04, an impressive 86% ahead of forecasts. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

earnings-and-revenue-growth
NYSE:AAN Earnings and Revenue Growth April 29th 2021

Taking into account the latest results, Aaron's Company's nine analysts currently expect revenues in 2021 to be US$1.76b, approximately in line with the last 12 months. Aaron's Company is also expected to turn profitable, with statutory earnings of US$2.59 per share. In the lead-up to this report, the analysts had been modelling revenues of US$1.68b and earnings per share (EPS) of US$1.87 in 2021. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a considerable lift to earnings per share in particular.

With these upgrades, we're not surprised to see that the analysts have lifted their price target 11% to US$28.57per share. 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 Aaron's Company at US$37.00 per share, while the most bearish prices it at US$20.00. 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 Aaron's Company shareholders.

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. We would highlight that sales are expected to reverse, with a forecast 1.5% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 0.8% over the last year. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 11% annually for the foreseeable future. It's pretty clear that Aaron's Company's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Aaron's Company's earnings potential next year. Fortunately, they also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on Aaron's Company. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Aaron's Company analysts - going out to 2025, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Aaron's Company (1 makes us a bit uncomfortable!) that you need to be mindful 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

AAN

Latest Companies Videos

Simply Wall St

We help you make informed decisions by giving you access to institutional quality data and analysis presented visually.

Learn More