The Consensus EPS Estimates For Farmers Edge Inc. (TSE:FDGE) Just Fell Dramatically

Market forces rained on the parade of Farmers Edge Inc. (TSE:FDGE) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

After the downgrade, the five analysts covering Farmers Edge are now predicting revenues of CA$49m in 2022. If met, this would reflect a major 41% improvement in sales compared to the last 12 months. Losses are forecast to narrow 2.1% to CA$1.67 per share. Yet before this consensus update, the analysts had been forecasting revenues of CA$59m and losses of CA$1.43 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

View our latest analysis for Farmers Edge

The consensus price target fell 8.0% to CA$3.36, implicitly signalling that lower earnings per share are a leading indicator for Farmers Edge's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Farmers Edge, with the most bullish analyst valuing it at CA$4.50 and the most bearish at CA$2.50 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

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. One thing stands out from these estimates, which is that Farmers Edge is forecast to grow faster in the future than it has in the past, with revenues expected to display 58% annualised growth until the end of 2022. If achieved, this would be a much better result than the 28% annual decline over the past year. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 18% per year. So it looks like Farmers Edge is expected to grow faster than its competitors, at least for a while.

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 Farmers Edge. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better 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 Farmers Edge.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Farmers Edge, including a short cash runway. For more information, you can click here to discover this and the 3 other risks we've identified.

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.