One Arena Hospitality Group d.d. (ZGSE:ARNT) Analyst Just Cut Their EPS Forecasts

The analyst covering Arena Hospitality Group d.d. (ZGSE:ARNT) 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 the analyst factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the current consensus from Arena Hospitality Group d.d's sole analyst is for revenues of Kn689m in 2022 which - if met - would reflect a huge 49% increase on its sales over the past 12 months. Per-share earnings are expected to increase 8.1% to Kn6.70. Before this latest update, the analyst had been forecasting revenues of Kn815m and earnings per share (EPS) of Kn14.40 in 2022. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.

View our latest analysis for Arena Hospitality Group d.d

The analyst made no major changes to their price target of Kn345, suggesting the downgrades are not expected to have a long-term impact on Arena Hospitality Group d.d's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Arena Hospitality Group d.d at Kn345 per share, while the most bearish prices it at Kn344. Even so, with a relatively close grouping of estimates, it looks like the analyst is quite confident in their valuations, suggesting Arena Hospitality Group d.d is an easy business to forecast or the underlying assumptions are obvious.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. For example, we noticed that Arena Hospitality Group d.d's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 49% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 11% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 14% per year. Not only are Arena Hospitality Group d.d's revenues expected to improve, it seems that the analyst is also expecting it to grow faster than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that the analyst has reduced their earnings per share estimates, suggesting business headwinds lay ahead for Arena Hospitality Group d.d. While the analyst did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Arena Hospitality Group d.d after the downgrade.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2024, which can be seen for 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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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.