Today is shaping up negative for Corporate Travel Management Limited (ASX:CTD) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic. Investors however, have been notably more optimistic about Corporate Travel Management recently, with the stock price up a worthy 16% to AU$20.27 in the past week. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.
After the downgrade, the nine analysts covering Corporate Travel Management are now predicting revenues of AU$202m in 2021. If met, this would reflect a substantial 34% improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of AU$303m in 2021. It looks like forecasts have become a fair bit less optimistic on Corporate Travel Management, given the pretty serious reduction to revenue estimates.
The consensus price target rose 5.1% to AU$20.12, with the analysts clearly more optimistic about Corporate Travel Management's prospects following this update. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Corporate Travel Management analyst has a price target of AU$22.00 per share, while the most pessimistic values it at AU$11.75. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that Corporate Travel Management's rate of growth is expected to accelerate meaningfully, with the forecast 80% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 4.3% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 15% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Corporate Travel Management is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for this year. They're also forecasting more rapid revenue growth than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Given the stark change in sentiment, we'd understand if investors became more cautious on Corporate Travel Management after today.
Unsatisfied? We have estimates for Corporate Travel Management from its nine analysts out until 2025, and you can see them free on our platform here.
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