What Does The Future Hold For Avon Rubber p.l.c. (LON:AVON)? These Analysts Have Been Cutting Their Estimates

The analysts covering Avon Rubber p.l.c. (LON:AVON) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

After this downgrade, Avon Rubber's seven analysts are now forecasting revenues of UK£262m in 2021. This would be a huge 56% improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of UK£293m in 2021. The consensus view seems to have become more pessimistic on Avon Rubber, noting the substantial drop in revenue estimates in this update.

View our latest analysis for Avon Rubber

Notably, the analysts have cut their price target 9.6% to UK£38.38, suggesting concerns around Avon Rubber's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Avon Rubber analyst has a price target of UK£47.00 per share, while the most pessimistic values it at UK£34.80. 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.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Avon Rubber's rate of growth is expected to accelerate meaningfully, with the forecast 56% revenue growth noticeably faster than its historical growth of 5.4% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 4.8% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Avon Rubber is expected to grow much faster than its industry.

The Bottom Line

The clear low-light was that analysts slashing their revenue forecasts for Avon Rubber this year. They're also forecasting more rapid revenue growth than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Avon Rubber's future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Avon Rubber going forwards.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Avon Rubber's business, like its declining profit margins. For more information, you can click here to discover this and the 2 other warning signs 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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