Watkin Jones Plc (LON:WJG) Analysts Are Way More Bearish Than They Used To Be

Market forces rained on the parade of Watkin Jones Plc (LON:WJG) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After the downgrade, the six analysts covering Watkin Jones are now predicting revenues of UK£426m in 2023. If met, this would reflect a solid 16% improvement in sales compared to the last 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of UK£0.13 per share in 2023. Previously, the analysts had been modelling revenues of UK£480m and earnings per share (EPS) of UK£0.083 in 2023. There looks to have been a major change in sentiment regarding Watkin Jones' prospects, with a measurable cut to revenues and the analysts now forecasting a loss instead of a profit.

View our latest analysis for Watkin Jones

The consensus price target fell 40% to UK£0.97, implicitly signalling that lower earnings per share are a leading indicator for Watkin Jones' valuation. 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. Currently, the most bullish analyst values Watkin Jones at UK£1.75 per share, while the most bearish prices it at UK£0.27. 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 think this business will perform. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Watkin Jones' growth to accelerate, with the forecast 34% annualised growth to the end of 2023 ranking favourably alongside historical growth of 3.4% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue shrink 6.5% per year. So it's clear with the acceleration in growth, Watkin Jones is expected to grow meaningfully faster than the wider industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Watkin Jones dropped from profits to a loss this year. Sadly they also cut their revenue estimates, although at least the company is expected to perform a bit better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Watkin Jones.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Watkin Jones 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. 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.