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The analysts might have been a bit too bullish on Potbelly Corporation (NASDAQ:PBPB), given that the company fell short of expectations when it released its quarterly results last week. Revenues missed expectations somewhat, coming in at US$73m, but statutory earnings fell catastrophically short, with a loss of US$0.56 some 51% larger than what the analysts had predicted. 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. We’ve gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

See our latest analysis for Potbelly

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Taking into account the latest results, the most recent consensus for Potbelly from three analysts is for revenues of US$342.4m in 2021 which, if met, would be a modest 7.6% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 70% to US$0.63. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$361.3m and losses of US$0.60 per share in 2021. So it’s pretty clear consensus is more negative on Potbelly after the new consensus numbers; while the analysts trimmed their revenue estimates, they also administered a per-share loss expectations.

The average price target was broadly unchanged at US$2.63, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the 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. There are some variant perceptions on Potbelly, with the most bullish analyst valuing it at US$3.00 and the most bearish at US$2.25 per share. The narrow spread of estimates could suggest that the business’ future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Potbelly’s past performance and to peers in the same industry. One thing stands out from these estimates, which is that Potbelly is forecast to grow faster in the future than it has in the past, with revenues expected to grow 7.6%. If achieved, this would be a much better result than the 0.3% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 23% per year. Although Potbelly’s revenues are expected to improve, it seems that the analysts are still bearish on the business, forecasting it to grow slower than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at US$2.63, 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 forecasts for Potbelly going out to 2022, and you can see them free on our platform here.

You still need to take note of risks, for example – Potbelly has 3 warning signs we think you should be aware of.

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.

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