The Consensus EPS Estimates For PPHE Hotel Group Limited (LON:PPH) Just Fell Dramatically

The analysts covering PPHE Hotel Group Limited (LON:PPH) 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 analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the consensus from three analysts covering PPHE Hotel Group is for revenues of UK£154m in 2020, implying a concerning 57% decline in sales compared to the last 12 months. After this downgrade, the company is anticipated to report a loss of UK£1.09 in 2020, a sharp decline from a profit over the last year. However, before this estimates update, the consensus had been expecting revenues of UK£209m and UK£0.91 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

See our latest analysis for PPHE Hotel Group

The consensus price target fell 5.9% to €15.36, implicitly signalling that lower earnings per share are a leading indicator for PPHE Hotel Group's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values PPHE Hotel Group at €17.28 per share, while the most bearish prices it at €11.51. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await PPHE Hotel Group shareholders.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 57%, a significant reduction from annual growth of 13% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 7.3% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - PPHE Hotel Group is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple PPHE Hotel Group analysts - going out to 2024, and you can see them 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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