Need To Know: The Consensus Just Cut Its J D Wetherspoon plc (LON:JDW) Estimates For 2021

Market forces rained on the parade of J D Wetherspoon plc (LON:JDW) shareholders today, when the analysts downgraded their forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the downgrade, the latest consensus from J D Wetherspoon's eleven analysts is for revenues of UK£891m in 2021, which would reflect a decent 17% improvement in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing UK£992m of revenue in 2021. It looks like forecasts have become a fair bit less optimistic on J D Wetherspoon, given the substantial drop in revenue estimates.

See our latest analysis for J D Wetherspoon

We'd point out that there was no major changes to their price target of UK£12.66, suggesting the latest estimates were not enough to shift their view on the value of the business. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values J D Wetherspoon at UK£16.00 per share, while the most bearish prices it at UK£7.10. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the J D Wetherspoon's past performance and to peers in the same industry. One thing stands out from these estimates, which is that J D Wetherspoon is forecast to grow faster in the future than it has in the past, with revenues expected to display 17% annualised growth until the end of 2021. If achieved, this would be a much better result than the 4.0% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 13% annually. Not only are J D Wetherspoon's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The clear low-light was that analysts slashing their revenue forecasts for J D Wetherspoon this year. They're also forecasting more rapid 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 J D Wetherspoon going forwards.

There might be good reason for analyst bearishness towards J D Wetherspoon, like dilutive stock issuance over the past year. For more information, you can click here to discover this and the 1 other flag we've identified.

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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