The analysts covering Ingenia Communities Group (ASX:INA) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
Following the downgrade, the latest consensus from Ingenia Communities Group's three analysts is for revenues of AU$279m in 2022, which would reflect a notable 12% improvement in sales compared to the last 12 months. Per-share earnings are expected to shoot up 84% to AU$0.24. Before this latest update, the analysts had been forecasting revenues of AU$313m and earnings per share (EPS) of AU$0.25 in 2022. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a measurable cut to revenue estimates and a minor downgrade to EPS estimates to boot.
The average price target climbed 5.3% to AU$6.64 despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes. 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. There are some variant perceptions on Ingenia Communities Group, with the most bullish analyst valuing it at AU$6.75 and the most bearish at AU$6.47 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.
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. We would highlight that Ingenia Communities Group's revenue growth is expected to slow, with the forecast 12% annualised growth rate until the end of 2022 being well below the historical 19% p.a. growth over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue shrink 3.6% per year. Factoring in the forecast slowdown in growth, it's pretty clear that Ingenia Communities Group is still expected to grow faster than the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Ingenia Communities Group. Unfortunately, they also downgraded their revenue estimates, and our data indicates sales are expected to outperform the wider market. Even so, earnings per share are more important to the intrinsic value of the business. 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 Ingenia Communities Group after today.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Ingenia Communities Group analysts - going out to 2024, and you can see them free on our platform here.
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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.
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