Newsflash: Dotz S.A. (BVMF:DOTZ3) Analysts Have Been Trimming Their Revenue Forecasts

Market forces rained on the parade of Dotz S.A. (BVMF:DOTZ3) shareholders today, when the analysts downgraded their forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

After the downgrade, the three analysts covering Dotz are now predicting revenues of R$196m in 2022. If met, this would reflect a major 48% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 71% to R$0.17. Yet before this consensus update, the analysts had been forecasting revenues of R$222m and losses of R$0.05 per share in 2022. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

View our latest analysis for Dotz

There was no major change to the consensus price target of R$15.00, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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$6.00. 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. It's clear from the latest estimates that Dotz's rate of growth is expected to accelerate meaningfully, with the forecast 69% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 19% over the past year. Compare this with other companies in the same industry, which are forecast to grow their revenue 12% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Dotz to grow faster than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Dotz. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Dotz going forwards.

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.

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.

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.