Time To Worry? Analysts Just Downgraded Their Grafton Group plc (LON:GFTU) Outlook

One thing we could say about the analysts on Grafton Group plc (LON:GFTU) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following this downgrade, Grafton Group's ten analysts are forecasting 2021 revenues to be UK£2.5b, approximately in line with the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of UK£2.9b in 2021. It looks like forecasts have become a fair bit less optimistic on Grafton Group, given the measurable cut to revenue estimates.

See our latest analysis for Grafton Group

There was no particular change to the consensus price target of UK£13.58, with Grafton Group's latest outlook seemingly not enough to result in a change of valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Grafton Group analyst has a price target of UK£15.25 per share, while the most pessimistic values it at UK£11.30. This is a very narrow spread of estimates, implying either that Grafton Group is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 0.4% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 1.2% 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 4.4% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Grafton Group is expected to lag the wider industry.

The Bottom Line

The clear low-light was that analysts slashing their revenue forecasts for Grafton Group this year. They're also anticipating slower revenue growth than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Grafton Group going forwards.

Still got questions? We have estimates for Grafton Group from its ten analysts out until 2023, 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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