As you might know, Transcat, Inc. (NASDAQ:TRNS) just kicked off its latest third-quarter results with some very strong numbers. It was overall a positive result, with revenues beating expectations by 2.5% to hit US$44m. Transcat also reported a statutory profit of US$0.24, which was an impressive 27% above what the analysts had forecast. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Transcat after the latest results.
Taking into account the latest results, the most recent consensus for Transcat from six analysts is for revenues of US$184.6m in 2022 which, if met, would be a decent 8.3% increase on its sales over the past 12 months. Per-share earnings are expected to bounce 33% to US$1.27. Before this earnings report, the analysts had been forecasting revenues of US$183.6m and earnings per share (EPS) of US$1.24 in 2022. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 17% to US$46.50. 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. The most optimistic Transcat analyst has a price target of US$49.00 per share, while the most pessimistic values it at US$44.00. This is a very narrow spread of estimates, implying either that Transcat is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Transcat's rate of growth is expected to accelerate meaningfully, with the forecast 8.3% revenue growth noticeably faster than its historical growth of 6.9%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 5.9% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Transcat to grow faster than the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Transcat following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster 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.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Transcat going out to 2023, and you can see them free on our platform here..
You should always think about risks though. Case in point, we've spotted 2 warning signs for Transcat 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.
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.
