Analysts Have Been Trimming Their G8 Education Limited (ASX:GEM) Price Target After Its Latest Report

G8 Education Limited (ASX:GEM) shareholders are probably feeling a little disappointed, since its shares fell 7.6% to AU$0.85 in the week after its latest half-year results. It was a credible result overall, with revenues of AU$465m and statutory earnings per share of AU$0.084 both in line with analyst estimates, showing that G8 Education is executing in line with expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

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Taking into account the latest results, the current consensus, from the five analysts covering G8 Education, is for revenues of AU$976.7m in 2025. This implies a perceptible 2.3% reduction in G8 Education's revenue over the past 12 months. Statutory per-share earnings are expected to be AU$0.091, roughly flat on the last 12 months. Before this earnings report, the analysts had been forecasting revenues of AU$1.02b and earnings per share (EPS) of AU$0.092 in 2025. The consensus seems maybe a little more pessimistic, trimming their revenue forecasts after the latest results even though there was no change to its EPS estimates.

See our latest analysis for G8 Education

It will come as no surprise then, that the consensus price target fell 19% to AU$1.10following these changes. 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 G8 Education analyst has a price target of AU$1.70 per share, while the most pessimistic values it at AU$0.90. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

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 revenue is expected to slow, with a forecast annualised decline of 4.5% by the end of 2025. This indicates a significant reduction from annual growth of 5.4% 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 6.6% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - G8 Education is expected to lag the wider industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. Even so, earnings are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of G8 Education's future valuation.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple G8 Education analysts - going out to 2027, and you can see them free on our platform here.

Plus, you should also learn about the 1 warning sign we've spotted with G8 Education .

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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.