Today is shaping up negative for Pet Center Comércio e Participações S.A. (BVMF:PETZ3) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. Bidders are definitely seeing a different story, with the stock price of R$18.64 reflecting a 12% rise in the past week. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.
After the downgrade, the seven analysts covering Center Comércio e Participações are now predicting revenues of R$2.7b in 2022. If met, this would reflect a substantial 41% improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of R$3.1b in 2022. The consensus view seems to have become more pessimistic on Center Comércio e Participações, noting the substantial drop in revenue estimates in this update.
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 Center Comércio e Participações' rate of growth is expected to accelerate meaningfully, with the forecast 41% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 26% p.a. over the past five years. 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 Center Comércio e Participações to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for this year. They're also forecasting more rapid revenue growth than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Center Comércio e Participações after today.
Want more information? At least one of Center Comércio e Participações' seven analysts has provided estimates out to 2024, which can be seen for 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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