Dotz S.A. (BVMF:DOTZ3) Analysts Just Cut Their EPS Forecasts Substantially

One thing we could say about the analysts on Dotz S.A. (BVMF:DOTZ3) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

Following the downgrade, the current consensus from Dotz's three analysts is for revenues of R$146m in 2022 which - if met - would reflect a decent 11% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 24% to R$0.45. However, before this estimates update, the consensus had been expecting revenues of R$187m and R$0.17 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

View our latest analysis for Dotz

The consensus price target fell 32% to R$10.13, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Dotz analyst has a price target of R$22.00 per share, while the most pessimistic values it at R$3.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

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 would highlight that Dotz's revenue growth is expected to slow, with the forecast 15% annualised growth rate until the end of 2022 being well below the historical 19% growth over the last year. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 12% annually. Factoring in the forecast slowdown in growth, it looks like Dotz is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. There was also a drop in their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Dotz.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Dotz 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.