Rede D'Or São Luiz S.A. (BVMF:RDOR3) Analysts Just Trimmed Their Revenue Forecasts By 11%

Market forces rained on the parade of Rede D'Or São Luiz S.A. (BVMF:RDOR3) shareholders today, when the analysts downgraded their forecasts for next year. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. Shares are up 5.2% to R$29.69 in the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

Following the downgrade, the most recent consensus for Rede D'Or São Luiz from its nine analysts is for revenues of R$47b in 2023 which, if met, would be a sizeable 110% increase on its sales over the past 12 months. Statutory earnings per share are presumed to shoot up 82% to R$1.12. Before this latest update, the analysts had been forecasting revenues of R$53b and earnings per share (EPS) of R$1.17 in 2023. 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 small dip in EPS estimates to boot.

See our latest analysis for Rede D'Or São Luiz

Despite the cuts to forecast earnings, there was no real change to the R$38.81 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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 Rede D'Or São Luiz at R$46.30 per share, while the most bearish prices it at R$32.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Rede D'Or São Luiz shareholders.

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. The analysts are definitely expecting Rede D'Or São Luiz's growth to accelerate, with the forecast 81% annualised growth to the end of 2023 ranking favourably alongside historical growth of 19% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 13% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Rede D'Or São Luiz 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. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on Rede D'Or São Luiz after today.

That said, the analysts might have good reason to be negative on Rede D'Or São Luiz, given dilutive stock issuance over the past year. Learn more, and discover the 2 other risks we've identified, for free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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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.