It's been a mediocre week for Papa John's International, Inc. (NASDAQ:PZZA) shareholders, with the stock dropping 16% to US$58.18 in the week since its latest annual results. It looks like the results were pretty good overall. While revenues of US$1.6b were in line with analyst predictions, statutory losses were much smaller than expected, with Papa John's International losing US$0.24 per share. Following the result, 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 analysts have changed their earnings models, following these results.
Taking into account the latest results, the latest consensus from Papa John's International's ten analysts is for revenues of US$1.66b in 2020, which would reflect a reasonable 2.3% improvement in sales compared to the last 12 months. Earnings are expected to improve, with Papa John's International forecast to report a statutory profit of US$1.27 per share. Before this earnings report, analysts had been forecasting revenues of US$1.65b and earnings per share (EPS) of US$1.11 in 2020. Although the revenue estimates have not really changed, we can see there's been a nice gain to earnings per share expectations, suggesting that analysts have become more bullish after the latest result.
There's been no major changes to the consensus price target of US$68.33, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. 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 Papa John's International at US$75.00 per share, while the most bearish prices it at US$59.00. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
Further, we can compare these estimates to past performance, and see how Papa John's International forecasts compare to the wider market's forecast performance. For example, we noticed that Papa John's International's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow at 2.3%, well above its historical decline of 0.4% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 8.5% per year. So although Papa John's International's revenue growth is expected to improve, it is still expected to grow slower than the market.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around Papa John's International's earnings potential next year. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Papa John's International's revenues are expected to perform worse than the wider market. 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 Papa John's International. 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 Papa John's International going out to 2023, and you can see them free on our platform here..
It might also be worth considering whether Papa John's International's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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