One of the biggest stories of last week was how Endava plc (NYSE:DAVA) shares plunged 20% in the week since its latest annual results, closing yesterday at US$26.62. Statutory earnings per share fell badly short of expectations, coming in at UK£0.29, some 32% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at UK£741m. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Endava

After the latest results, the twelve analysts covering Endava are now predicting revenues of UK£804.6m in 2025. If met, this would reflect a notable 8.6% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to surge 33% to UK£0.38. Before this earnings report, the analysts had been forecasting revenues of UK£820.9m and earnings per share (EPS) of UK£0.60 in 2025. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a large cut to EPS estimates.

The average price target fell 11% to US$40.57, with reduced earnings forecasts clearly tied to a lower valuation estimate. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Endava at US$64.87 per share, while the most bearish prices it at US$30.10. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Endava's revenue growth is expected to slow, with the forecast 8.6% annualised growth rate until the end of 2025 being well below the historical 22% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 8.9% annually. So it's pretty clear that, while Endava's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Endava. Happily, there were no real changes to revenue forecasts, with the business still expected to grow in line with the overall industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

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 Endava analysts - going out to 2027, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 2 warning signs for Endava you should be aware of.

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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.