It’s been a good week for National Health Investors, Inc. (NYSE:NHI) shareholders, because the company has just released its latest full-year results, and the shares gained 3.9% to US$70.91. Revenues of US$330m were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$4.14, missing estimates by 3.7%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether the analysts have changed their mind on National Health Investors after the latest results.
Following last week’s earnings report, National Health Investors’ four analysts are forecasting 2021 revenues to be US$325.9m, approximately in line with the last 12 months. Statutory earnings per share are expected to decline 11% to US$3.68 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$335.3m and earnings per share (EPS) of US$3.62 in 2021. So it looks like the analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is supposed to maintain EPS.
The average price target was steady at US$65.75even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings. 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. The most optimistic National Health Investors analyst has a price target of US$73.00 per share, while the most pessimistic values it at US$55.00. This is a very narrow spread of estimates, implying either that National Health Investors is an easy company to value, or – more likely – the analysts are relying heavily on some key assumptions.
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 1.1%, a significant reduction from annual growth of 7.8% 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 5.5% next year. It’s pretty clear that National Health Investors’ revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that there’s been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. With that said, earnings are more important to the long-term value of the business. The consensus price target held steady at US$65.75, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have estimates – from multiple National Health Investors analysts – going out to 2025, 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 National Health Investors (at least 2 which make us uncomfortable) , and understanding these should be part of your investment process.
If you decide to trade National Health Investors, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account.
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.