Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH) just released its latest third-quarter results and things are looking bullish. Ruth’s Hospitality Group outperformed on both revenues and the expected loss per share, with revenues of US$63m beating estimates by 15%. Statutory losses were US$0.15, 20% smaller thanthe analysts expected. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the consensus forecast from Ruth’s Hospitality Group’s five analysts is for revenues of US$374.4m in 2021, which would reflect a meaningful 12% improvement in sales compared to the last 12 months. Ruth’s Hospitality Group is also expected to turn profitable, with statutory earnings of US$0.58 per share. In the lead-up to this report, the analysts had been modelling revenues of US$367.7m and earnings per share (EPS) of US$0.48 in 2021. Although the revenue estimates have not really changed, we can see there’s been a sizeable expansion in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 15% to US$12.50. 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 Ruth’s Hospitality Group analyst has a price target of US$16.00 per share, while the most pessimistic values it at US$9.00. This shows there is still a bit of diversity in estimates, but analysts don’t appear to be totally split on the stock as though it might be a success or failure situation.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Ruth’s Hospitality Group’s growth to accelerate, with the forecast 12% growth ranking favourably alongside historical growth of 2.9% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 22% next year. It seems obvious that, while the future growth outlook is brighter than the recent past, Ruth’s Hospitality Group is expected to grow slower than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Ruth’s Hospitality Group’s earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that Ruth’s Hospitality Group’s revenues are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn’t be too quick to come to a conclusion on Ruth’s Hospitality Group. 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 Ruth’s Hospitality Group going out to 2022, and you can see them free on our platform here..
Plus, you should also learn about the 3 warning signs we’ve spotted with Ruth’s Hospitality Group (including 1 which makes us a bit uncomfortable) .
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.