Analysts Have Just Cut Their ERG S.p.A. (BIT:ERG) Revenue Estimates By 11%

One thing we could say about the analysts on ERG S.p.A. (BIT:ERG) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the latest downgrade, the current consensus, from the seven analysts covering ERG, is for revenues of €986m in 2022, which would reflect a measurable 5.7% reduction in ERG's sales over the past 12 months. Statutory earnings per share are anticipated to plummet 23% to €0.82 in the same period. Prior to this update, the analysts had been forecasting revenues of €1.1b and earnings per share (EPS) of €0.87 in 2022. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a substantial drop in revenue estimates and a minor downgrade to EPS estimates to boot.

Check out our latest analysis for ERG

Analysts made no major changes to their price target of €28.76, suggesting the downgrades are not expected to have a long-term impact on ERG's 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. The most optimistic ERG analyst has a price target of €35.00 per share, while the most pessimistic values it at €21.90. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. Over the past five years, revenues have declined around 0.9% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 4.6% decline in revenue until the end of 2022. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 5.4% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect ERG to suffer worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that ERG's revenues are expected to grow slower than the wider market. Overall, given the drastic downgrade to next year's forecasts, we'd be feeling a little more wary of ERG going forwards.

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

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.

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