Need To Know: Analysts Just Made A Substantial Cut To Their Home Capital Group Inc. (TSE:HCG) Estimates

The analysts covering Home Capital Group Inc. (TSE:HCG) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

Following the latest downgrade, the current consensus, from the six analysts covering Home Capital Group, is for revenues of CA$493m in 2022, which would reflect a considerable 11% reduction in Home Capital Group's sales over the past 12 months. Statutory earnings per share are anticipated to drop 14% to CA$4.46 in the same period. Before this latest update, the analysts had been forecasting revenues of CA$562m and earnings per share (EPS) of CA$5.17 in 2022. Indeed, we can see that the analysts are a lot more bearish about Home Capital Group's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

Check out our latest analysis for Home Capital Group

It'll come as no surprise then, to learn that the analysts have cut their price target 8.7% to CA$45.00. 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 Home Capital Group analyst has a price target of CA$49.00 per share, while the most pessimistic values it at CA$38.00. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Home Capital Group's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 15% by the end of 2022. This indicates a significant reduction from annual growth of 11% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 14% per year. It's pretty clear that Home Capital Group's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Home Capital Group. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than 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 Home Capital Group.

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 Home Capital Group 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.

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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.