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Burford Capital Limited Just Missed EPS By 30%: Here's What Analysts Think Will Happen Next

Investors in Burford Capital Limited (LON:BUR) had a good week, as its shares rose 2.4% to close at UK£11.05 following the release of its yearly results. Results were mixed, with revenues of US$319m exceeding expectations, even as statutory earnings per share (EPS) fell badly short. Earnings were US$0.14 per share, -30% short of analyst expectations. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Burford Capital after the latest results.

See our latest analysis for Burford Capital

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earnings-and-revenue-growth

Taking into account the latest results, the current consensus from Burford Capital's three analysts is for revenues of US$499.0m in 2023, which would reflect a sizeable 56% increase on its sales over the past 12 months. Per-share earnings are expected to soar 733% to US$1.16. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$543.0m and earnings per share (EPS) of US$3.34 in 2023. The analysts seem less optimistic after the recent results, reducing their sales forecasts and making a large cut to earnings per share numbers.

The analysts made no major changes to their price target of UK£13.80, suggesting the downgrades are not expected to have a long-term impact on Burford Capital's valuation. 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 Burford Capital analyst has a price target of UK£13.89 per share, while the most pessimistic values it at UK£13.73. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Burford Capital is an easy business to forecast or the the analysts are all using similar assumptions.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. For example, we noticed that Burford Capital's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 56% growth to the end of 2023 on an annualised basis. That is well above its historical decline of 14% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 26% per year. Not only are Burford Capital's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Burford Capital. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. The consensus price target held steady at UK£13.80, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Burford Capital analysts - going out to 2024, and you can see them free on our platform here.

It is also worth noting that we have found 2 warning signs for Burford Capital that you need to take into consideration.

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

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.

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