Time To Worry? Analysts Are Downgrading Their Derichebourg SA (EPA:DBG) Outlook

Today is shaping up negative for Derichebourg SA (EPA:DBG) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the current consensus, from the four analysts covering Derichebourg, is for revenues of €3.6b in 2023, which would reflect a stressful 28% reduction in Derichebourg's sales over the past 12 months. Statutory earnings per share are supposed to nosedive 25% to €0.91 in the same period. Prior to this update, the analysts had been forecasting revenues of €4.3b and earnings per share (EPS) of €1.10 in 2023. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a real cut to earnings per share numbers as well.

View our latest analysis for Derichebourg

The average price target climbed 11% to €9.26 despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Derichebourg, with the most bullish analyst valuing it at €13.80 and the most bearish at €6.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with a forecast 48% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 15% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 4.3% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Derichebourg is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The rising price target is a puzzle, but still - with a serious cut to this year's outlook, we wouldn't be surprised if investors were a bit wary of Derichebourg.

A high debt burden combined with a downgrade of this magnitude always gives us some reason for concern, especially if these forecasts are just the first sign of a business downturn. You can learn more about our debt analysis for free on our platform here.

We also provide an overview of the Derichebourg Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, 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.