Things Look Grim For Ascott Real Estate Investment Trust (SGX:HMN) After Today's Downgrade

Market forces rained on the parade of Ascott Real Estate Investment Trust (SGX:HMN) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. Shares are up 8.7% to S$0.81 in the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

Following the downgrade, the most recent consensus for Ascott Real Estate Investment Trust from its six analysts is for revenues of S$618m in 2020 which, if met, would be a meaningful 20% increase on its sales over the past 12 months. Statutory earnings per share are supposed to nosedive 61% to S$0.052 in the same period. Before this latest update, the analysts had been forecasting revenues of S$705m and earnings per share (EPS) of S$0.074 in 2020. Indeed, we can see that the analysts are a lot more bearish about Ascott Real Estate Investment Trust's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for Ascott Real Estate Investment Trust

It'll come as no surprise then, to learn that the analysts have cut their price target 9.7% to S$1.24. 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 Ascott Real Estate Investment Trust analyst has a price target of S$1.50 per share, while the most pessimistic values it at S$0.74. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's clear from the latest estimates that Ascott Real Estate Investment Trust's rate of growth is expected to accelerate meaningfully, with the forecast 20% revenue growth noticeably faster than its historical growth of 6.9% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 4.1% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Ascott Real Estate Investment Trust is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Ascott Real Estate Investment Trust.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Ascott Real Estate Investment Trust going out to 2023, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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