DFS Furniture plc (LON:DFS) Reported Earnings Last Week And Analysts Are Already Upgrading Their Estimates

It's been a mediocre week for DFS Furniture plc (LON:DFS) shareholders, with the stock dropping 11% to UK£1.60 in the week since its latest full-year results. The statutory results were not great - while revenues of UK£725m were in line with expectations,DFS Furniture lost UK£0.31 a share in the process. Following the result, the 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

View our latest analysis for DFS Furniture

Taking into account the latest results, the most recent consensus for DFS Furniture from five analysts is for revenues of UK£1.09b in 2021 which, if met, would be a huge 50% increase on its sales over the past 12 months. Earnings are expected to improve, with DFS Furniture forecast to report a statutory profit of UK£0.20 per share. Before this earnings report, the analysts had been forecasting revenues of UK£1.0b and earnings per share (EPS) of UK£0.12 in 2021. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a sizeable expansion in earnings per share in particular.

Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of UK£2.38, suggesting that the forecast performance does not have a long term impact on the company's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic DFS Furniture analyst has a price target of UK£3.00 per share, while the most pessimistic values it at UK£1.80. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that DFS Furniture's rate of growth is expected to accelerate meaningfully, with the forecast 50% revenue growth noticeably faster than its historical growth of 5.1%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 9.4% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that DFS Furniture is expected to grow much faster than its 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 DFS Furniture following these results. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster 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.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple DFS Furniture analysts - 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 2 warning signs for DFS Furniture that 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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