One thing we could say about the analysts on The Green Organic Dutchman Holdings Ltd. (TSE:TGOD) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. Shares are up 6.1% to CA$0.35 in the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.
After the downgrade, the three analysts covering Green Organic Dutchman Holdings are now predicting revenues of CA$40m in 2021. If met, this would reflect a huge 86% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 88% to CA$0.06. However, before this estimates update, the consensus had been expecting revenues of CA$63m and CA$0.03 per share in losses. 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.
The consensus price target fell 7.0% to CA$0.22, 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 Green Organic Dutchman Holdings analyst has a price target of CA$0.25 per share, while the most pessimistic values it at CA$0.20. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Green Organic Dutchman Holdings is an easy business to forecast or the underlying assumptions are obvious.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The period to the end of 2021 brings more of the same, according to the analysts, with revenue forecast to display 86% growth on an annualised basis. That is in line with its 96% annual growth over the past year. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 34% annually. So it's pretty clear that Green Organic Dutchman Holdings is forecast to grow substantially faster than its 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 Green Organic Dutchman Holdings. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Green Organic Dutchman Holdings.
As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Green Organic Dutchman Holdings' financials, such as major dilution from new stock issuance in the past year. Learn more, and discover the 2 other risks we've identified, for 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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