It's been a mediocre week for Savers Value Village, Inc. (NYSE:SVV) shareholders, with the stock dropping 12% to US$8.78 in the week since its latest second-quarter results. It looks like a pretty bad result, all things considered. Although revenues of US$387m were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 67% to hit US$0.06 per share. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Following last week's earnings report, Savers Value Village's eight analysts are forecasting 2024 revenues to be US$1.54b, approximately in line with the last 12 months. Statutory earnings per share are predicted to leap 121% to US$0.52. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.57b and earnings per share (EPS) of US$0.62 in 2024. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a real cut to EPS estimates.
The average price target fell 23% to US$14.13, with reduced earnings forecasts clearly tied to a lower valuation estimate. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Savers Value Village analyst has a price target of US$22.00 per share, while the most pessimistic values it at US$10.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Savers Value Village's revenue growth is expected to slow, with the forecast 3.4% annualised growth rate until the end of 2024 being well below the historical 9.4% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 11% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Savers Value Village.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Savers Value Village's future valuation.
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 forecasts for Savers Value Village going out to 2026, 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 3 warning signs with Savers Value Village (at least 1 which doesn't sit too well with us) , and understanding these should be part of your investment process.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
