The Consensus EPS Estimates For Real Matters Inc. (TSE:REAL) Just Fell Dramatically

Today is shaping up negative for Real Matters Inc. (TSE:REAL) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business. Surprisingly the share price has been buoyant, rising 24% to CA$5.30 in the past 7 days. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.

Following the downgrade, the consensus from five analysts covering Real Matters is for revenues of US$172m in 2023, implying a disturbing 36% decline in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 41% to US$0.14. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$192m and losses of US$0.10 per share in 2023. 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.

See our latest analysis for Real Matters

There was no major change to the consensus price target of US$4.29, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Real Matters, with the most bullish analyst valuing it at US$8.55 and the most bearish at US$4.53 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.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that sales are expected to reverse, with a forecast 45% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 8.8% 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 6.0% per year. It's pretty clear that Real Matters' revenues are expected to perform substantially worse 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 Real Matters. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Real Matters.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Real Matters analysts - going out to 2025, and you can see them 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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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.