Time To Worry? Analysts Just Downgraded Their Fairfax Financial Holdings Limited (TSE:FFH) Outlook

The analysts covering Fairfax Financial Holdings Limited (TSE:FFH) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory 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.

Following the downgrade, the most recent consensus for Fairfax Financial Holdings from its four analysts is for revenues of US$32b in 2023 which, if met, would be a notable 14% increase on its sales over the past 12 months. Per-share earnings are expected to bounce 73% to US$121. Before this latest update, the analysts had been forecasting revenues of US$32b and earnings per share (EPS) of US$119 in 2023. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business.

Check out our latest analysis for Fairfax Financial Holdings

It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$872. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Fairfax Financial Holdings, with the most bullish analyst valuing it at US$1,346 and the most bearish at US$790 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting Fairfax Financial Holdings' growth to accelerate, with the forecast 18% annualised growth to the end of 2023 ranking favourably alongside historical growth of 8.2% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 2.4% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Fairfax Financial Holdings is expected to grow much faster than its industry.

The Bottom Line

The most obvious conclusion from this consensus update is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. On the plus side, there were no major changes to revenue estimates; although analyst forecasts do imply revenues will come in ahead of 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 Fairfax Financial Holdings after today.

There might be good reason for analyst bearishness towards Fairfax Financial Holdings, like its declining profit margins. For more information, you can click here to discover this and the 3 other flags we've identified.

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.