Some Analysts Just Cut Their Instone Real Estate Group SE (ETR:INS) Estimates

The analysts covering Instone Real Estate Group SE (ETR:INS) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

After the downgrade, the consensus from Instone Real Estate Group's five analysts is for revenues of €690m in 2023, which would reflect an uneasy 11% decline in sales compared to the last year of performance. Statutory earnings per share are supposed to plunge 58% to €0.78 in the same period. Previously, the analysts had been modelling revenues of €827m and earnings per share (EPS) of €0.83 in 2023. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a substantial drop in revenue estimates and a minor downgrade to EPS estimates to boot.

Our analysis indicates that INS is potentially undervalued!

The consensus price target fell 16% to €11.10, 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. There are some variant perceptions on Instone Real Estate Group, with the most bullish analyst valuing it at €13.60 and the most bearish at €7.50 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Instone Real Estate Group shareholders.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 8.9% by the end of 2023. This indicates a significant reduction from annual growth of 24% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 13% per year. The forecasts do look comparatively optimistic for Instone Real Estate Group, since they're expecting it to shrink slower than the 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 Instone Real Estate Group. Unfortunately, they also downgraded their revenue estimates, and our data indicates sales are expected to outperform the wider market. Even so, earnings per share are more important to the intrinsic value of the business. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Given the stark change in sentiment, we'd understand if investors became more cautious on Instone Real Estate Group after today.

That said, the analysts might have good reason to be negative on Instone Real Estate Group, given concerns around earnings quality. Learn more, and discover the 2 other warning signs we've identified, for free on our platform here.

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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.