Knights Group Holdings plc (LON:KGH) Just Reported, And Analysts Assigned A UK£1.90 Price Target

It's been a pretty great week for Knights Group Holdings plc (LON:KGH) shareholders, with its shares surging 10% to UK£0.75 in the week since its latest annual results. Results were roughly in line with estimates, with revenues of UK£142m and statutory earnings per share of UK£0.092. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Knights Group Holdings after the latest results.

Check out our latest analysis for Knights Group Holdings

Taking into account the latest results, the consensus forecast from Knights Group Holdings' six analysts is for revenues of UK£156.4m in 2024. This reflects a decent 10% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to bounce 39% to UK£0.13. In the lead-up to this report, the analysts had been modelling revenues of UK£158.5m and earnings per share (EPS) of UK£0.15 in 2024. So there's definitely been a decline in sentiment after the latest results, noting the substantial drop in new EPS forecasts.

The average price target fell 14% to UK£1.90, with reduced earnings forecasts clearly tied to a lower valuation estimate. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Knights Group Holdings analyst has a price target of UK£4.05 per share, while the most pessimistic values it at UK£0.75. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.

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. It's pretty clear that there is an expectation that Knights Group Holdings' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 10% growth on an annualised basis. This is compared to a historical growth rate of 27% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.0% annually. Even after the forecast slowdown in growth, it seems obvious that Knights Group Holdings is also expected to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Knights Group Holdings analysts - going out to 2026, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 4 warning signs for Knights Group Holdings that you should be aware of.

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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.