Market forces rained on the parade of Trisul S.A. (BVMF:TRIS3) shareholders today, when the analysts downgraded their forecasts for next year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the most recent consensus for Trisul from its four analysts is for revenues of R$1.1b in 2022 which, if met, would be a substantial 24% increase on its sales over the past 12 months. Statutory earnings per share are expected to be R$0.86, roughly flat on the last 12 months. Before this latest update, the analysts had been forecasting revenues of R$1.3b and earnings per share (EPS) of R$1.72 in 2022. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a pretty serious decline to earnings per share numbers as well.
The consensus price target fell 16% to R$12.10, with the weaker earnings outlook clearly leading analyst valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Trisul at R$15.90 per share, while the most bearish prices it at R$7.60. 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.
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. We can infer from the latest estimates that forecasts expect a continuation of Trisul'shistorical trends, as the 19% annualised revenue growth to the end of 2022 is roughly in line with the 22% annual revenue growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 10% per year. So although Trisul is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider 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. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Trisul analysts - going out to 2024, 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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