Downgrade: Here's How Analysts See Evertz Technologies Limited (TSE:ET) Performing In The Near Term

The analysts covering Evertz Technologies Limited (TSE:ET) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

After the downgrade, the consensus from Evertz Technologies' four analysts is for revenues of CA$426m in 2021, which would reflect a small 5.7% decline in sales compared to the last year of performance. Statutory earnings per share are supposed to sink 18% to CA$0.76 in the same period. Before this latest update, the analysts had been forecasting revenues of CA$479m and earnings per share (EPS) of CA$1.00 in 2021. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.

View our latest analysis for Evertz Technologies

The consensus price target fell 14% to CA$15.25, with the weaker earnings outlook clearly leading analyst valuation estimates. 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. The most optimistic Evertz Technologies analyst has a price target of CA$17.00 per share, while the most pessimistic values it at CA$14.00. This is a very narrow spread of estimates, implying either that Evertz Technologies is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Evertz Technologies' past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 5.7% revenue decline a notable change from historical growth of 4.8% 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 10% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Evertz Technologies is expected to lag 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 Evertz Technologies. 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 next year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Evertz Technologies.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Evertz Technologies analysts - going out to 2022, 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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