Xero Limited (ASX:XRO) shareholders are probably feeling a little disappointed, since its shares fell 4.7% to AU$79.67 in the week after its latest yearly results. It was an okay result overall, with revenues coming in at NZ$2.8b, roughly what the analysts had been expecting. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

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Taking into account the latest results, the most recent consensus for Xero from 14 analysts is for revenues of NZ$3.66b in 2027. If met, it would imply a huge 33% increase on its revenue over the past 12 months. Per-share earnings are expected to shoot up 36% to NZ$1.34. Before this earnings report, the analysts had been forecasting revenues of NZ$3.56b and earnings per share (EPS) of NZ$1.48 in 2027. So it's pretty clear consensus is mixed on Xero after the latest results; whilethe analysts lifted revenue numbers, they also administered a minor downgrade to per-share earnings expectations.

View our latest analysis for Xero

There's been no major changes to the price target of AU$129, suggesting that the impact of higher forecast revenue and lower earnings won't result in a meaningful change to the business' valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Xero analyst has a price target of AU$235 per share, while the most pessimistic values it at AU$77.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Xero's past performance and to peers in the same industry. It's clear from the latest estimates that Xero's rate of growth is expected to accelerate meaningfully, with the forecast 33% annualised revenue growth to the end of 2027 noticeably faster than its historical growth of 22% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 16% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Xero is expected to grow much faster than its industry.

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The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. The consensus price target held steady at AU$129, 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 forecasts for Xero going out to 2029, and you can see them free on our platform here.

It is also worth noting that we have found 1 warning sign for Xero that you need to take into consideration.

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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.

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