Some Analysts Just Cut Their CLS Holdings plc (LON:CLI) Estimates

The analysts covering CLS Holdings plc (LON:CLI) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following the latest downgrade, the dual analysts covering CLS Holdings provided consensus estimates of UK£112m revenue in 2022, which would reflect a sizeable 20% decline on its sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of UK£128m in 2022. It looks like forecasts have become a fair bit less optimistic on CLS Holdings, given the measurable cut to revenue estimates.

See our latest analysis for CLS Holdings

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the CLS Holdings' past performance and to peers in the same industry. Over the past five years, revenues have declined around 15% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 36% decline in revenue until the end of 2022. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 0.7% annually. So while a broad number of companies are forecast to grow, unfortunately CLS Holdings is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. They're also anticipating slower revenue growth than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on CLS Holdings after today.

Uncomfortably, our automated valuation tool also suggests that CLS Holdings stock could be overvalued following the downgrade. Shareholders could be left disappointed if these estimates play out. You can learn more about our valuation methodology for 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.