As you might know, SecureWorks Corp. (NASDAQ:SCWX) just kicked off its latest quarterly results with some very strong numbers. Revenues and losses per share were both better than expected, with revenues of US$141m leading estimates by 4.7%. Statutory losses were smaller than the analystsexpected, coming in at US$0.09 per share. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on SecureWorks after the latest results.
Following last week's earnings report, SecureWorks' nine analysts are forecasting 2021 revenues to be US$560.7m, approximately in line with the last 12 months. Per-share losses are predicted to creep up to US$0.41. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$553.7m and losses of US$0.55 per share in 2021. While the revenue estimates were largely unchanged, sentiment seems to have improved, with the analysts upgrading revenues and making a losses per share in particular.
These new estimates led to the consensus price target rising 7.0% to US$13.61, with lower forecast losses suggesting things could be looking up for SecureWorks. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on SecureWorks, with the most bullish analyst valuing it at US$17.00 and the most bearish at US$11.50 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await SecureWorks shareholders.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 0.07%, a significant reduction from annual growth of 12% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 12% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - SecureWorks is expected to lag the wider industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for SecureWorks going out to 2023, and you can see them free on our platform here.
Even so, be aware that SecureWorks is showing 2 warning signs in our investment analysis , you should know about...
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