The latest analyst coverage could presage a bad day for CleanSpace Holdings Limited (ASX:CSX), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the most recent consensus for CleanSpace Holdings from its two analysts is for revenues of AU$62m in 2021 which, if met, would be a credible 2.2% increase on its sales over the past 12 months. Statutory earnings per share are anticipated to tumble 23% to AU$0.20 in the same period. Prior to this update, the analysts had been forecasting revenues of AU$72m and earnings per share (EPS) of AU$0.25 in 2021. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a considerable drop in earnings per share numbers as well.
It'll come as no surprise then, to learn that the analysts have cut their price target 5.3% to AU$6.75. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on CleanSpace Holdings, with the most bullish analyst valuing it at AU$7.50 and the most bearish at AU$6.75 per share. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.
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. It's pretty clear that there is an expectation that CleanSpace Holdings' revenue growth will slow down substantially, with revenues to the end of 2021 expected to display 4.4% growth on an annualised basis. This is compared to a historical growth rate of 207% over the past year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 15% per year. Factoring in the forecast slowdown in growth, it seems obvious that CleanSpace Holdings is also expected to grow slower than other industry participants.
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, and industry data suggests that CleanSpace Holdings' revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of CleanSpace Holdings.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have analyst estimates for CleanSpace Holdings going out as far as 2025, 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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