These Analysts Think AB Dynamics plc's (LON:ABDP) Sales Are Under Threat

The latest analyst coverage could presage a bad day for AB Dynamics plc (LON:ABDP), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic. Surprisingly the share price has been buoyant, rising 12% to UK£22.30 in the past 7 days. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

Following the latest downgrade, the seven analysts covering AB Dynamics provided consensus estimates of UK£62m revenue in 2021, which would reflect a discernible 7.5% decline on its sales over the past 12 months. Per-share earnings are expected to accumulate 6.1% to UK£0.30. Previously, the analysts had been modelling revenues of UK£69m and earnings per share (EPS) of UK£0.40 in 2021. Indeed, we can see that the analysts are a lot more bearish about AB Dynamics' prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for AB Dynamics

Despite the cuts to forecast earnings, there was no real change to the UK£21.75 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. Currently, the most bullish analyst values AB Dynamics at UK£22.50 per share, while the most bearish prices it at UK£20.15. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.

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 the forecast 7.5% revenue decline a notable change from historical growth of 40% over the last year. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 11% annually for the foreseeable future. It's pretty clear that AB Dynamics' revenues are expected to perform substantially worse than 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. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that AB Dynamics' revenues are expected to grow slower than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on AB Dynamics after today.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for AB Dynamics going out to 2022, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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This article by Simply Wall St is general in nature. 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.
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