Some Dalata Hotel Group plc (ISE:DHG) Analysts Just Made A Major Cut To Next Year's Estimates

The latest analyst coverage could presage a bad day for Dalata Hotel Group plc (ISE:DHG), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

Following the downgrade, the latest consensus from Dalata Hotel Group's four analysts is for revenues of €198m in 2021, which would reflect a huge 45% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 61% to €0.20. Yet before this consensus update, the analysts had been forecasting revenues of €234m and losses of €0.12 per share in 2021. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for Dalata Hotel Group

The consensus price target was broadly unchanged at €4.83, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the 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. There are some variant perceptions on Dalata Hotel Group, with the most bullish analyst valuing it at €5.30 and the most bearish at €4.35 per share. This is a very narrow spread of estimates, implying either that Dalata Hotel Group is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Dalata Hotel Group's growth to accelerate, with the forecast 45% annualised growth to the end of 2021 ranking favourably alongside historical growth of 3.3% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 16% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Dalata Hotel Group is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to 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 Dalata Hotel Group after the downgrade.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Dalata Hotel Group analysts - going out to 2023, 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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