The analyst covering Eurotech S.p.A. (BIT:ETH) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analyst factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the latest downgrade, the current consensus, from the sole analyst covering Eurotech, is for revenues of €90m in 2020, which would reflect a discernible 7.0% reduction in Eurotech’s sales over the past 12 months. Statutory earnings per share are supposed to plummet 48% to €0.25 in the same period. Prior to this update, the analyst had been forecasting revenues of €100m and earnings per share (EPS) of €0.37 in 2020. From this we can that analyst sentiment has definitely become more bearish after the latest update, leading to lower revenue forecasts and a pretty serious decline to earnings per share estimates.
It’ll come as no surprise then, to learn that the analyst has cut their price target 15% to €7.50.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 7.0%, a significant reduction from annual growth of 11% 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 6.7% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining – Eurotech is expected to lag the wider industry.
The Bottom Line
The biggest issue in the new estimates is that the analyst has reduced their earnings per share estimates, suggesting business headwinds lay ahead for Eurotech. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year’s expectations and a falling price target, we wouldn’t be surprised if investors were becoming wary of Eurotech.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At least one analyst has provided forecasts out to 2021, which can be seen for free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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