Stock Analysis

Analyst Forecasts Just Became More Bearish On Group Plc (LON:MADE)

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Today is shaping up negative for Group Plc (LON:MADE) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

Following the downgrade, the current consensus from Group's five analysts is for revenues of UK£418m in 2022 which - if met - would reflect a notable 12% increase on its sales over the past 12 months. Before the latest update, the analysts were foreseeing UK£471m of revenue in 2022. It looks like forecasts have become a fair bit less optimistic on Group, given the substantial drop in revenue estimates.

Check out our latest analysis for Group

LSE:MADE Earnings and Revenue Growth May 17th 2022

Notably, the analysts have cut their price target 15% to UK£1.26, suggesting concerns around Group's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Group at UK£2.30 per share, while the most bearish prices it at UK£0.90. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Group's revenue growth is expected to slow, with the forecast 12% annualised growth rate until the end of 2022 being well below the historical 23% p.a. growth over the last three years. Compare this to the 19 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 14% per year. Factoring in the forecast slowdown in growth, it looks like Group is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. They're also forecasting for revenues to grow at about the same rate as companies in the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. 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 Group after today.

Looking for more information? We have estimates for Group from its five analysts out until 2024, and you can see them free on our platform here.

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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