Downgrade: Here's How Analysts See PPHE Hotel Group Limited (LON:PPH) Performing In The Near Term

The analysts covering PPHE Hotel Group Limited (LON:PPH) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the current consensus, from the three analysts covering PPHE Hotel Group, is for revenues of UK£197m in 2021, which would reflect a sizeable 25% reduction in PPHE Hotel Group's sales over the past 12 months. Losses are supposed to balloon 548% to UK£0.53 per share. However, before this estimates update, the consensus had been expecting revenues of UK£227m and UK£0.30 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

View our latest analysis for PPHE Hotel Group

Analysts lifted their price target 5.1% to €15.12, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on PPHE Hotel Group, with the most bullish analyst valuing it at €17.26 and the most bearish at €10.97 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await PPHE Hotel Group shareholders.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 25% by the end of 2021. This indicates a significant reduction from annual growth of 9.2% 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 13% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - PPHE Hotel Group is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple PPHE Hotel Group analysts - going out to 2025, 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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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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