Analysts Just Made A Major Revision To Their ERG S.p.A. (BIT:ERG) Revenue Forecasts

Market forces rained on the parade of ERG S.p.A. (BIT:ERG) shareholders today, when the analysts downgraded their forecasts for next year. 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 six analysts covering ERG provided consensus estimates of €832m revenue in 2022, which would reflect a concerning 20% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to plunge 27% to €0.78 in the same period. Before this latest update, the analysts had been forecasting revenues of €967m and earnings per share (EPS) of €0.79 in 2022. So there's been a clear change in analyst sentiment in the recent update, with the analysts making a measurable cut to revenues and reconfirming their earnings per share estimates.

See our latest analysis for ERG

The consensus has reconfirmed its price target of €29.77, showing that the analysts don't expect weaker sales expectationsnext year to have a material impact on ERG's market value. 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. There are some variant perceptions on ERG, with the most bullish analyst valuing it at €35.00 and the most bearish at €26.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

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 17% 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 7.7% per year. So while a broad number of companies are forecast to grow, unfortunately ERG 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 there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales 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.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for ERG going out to 2024, 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.

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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.