This Analyst Just Downgraded Their Al Hammadi Company For Development and Investment (TADAWUL:4007) EPS Forecasts

Today is shaping up negative for Al Hammadi Company For Development and Investment (TADAWUL:4007) shareholders, with the covering analyst delivering a substantial negative revision to next year's forecasts. 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 latest downgrade, the current consensus, from the solo analyst covering Al Hammadi Company For Development and Investment, is for revenues of ر.س988m in 2022, which would reflect an uncomfortable 12% reduction in Al Hammadi Company For Development and Investment's sales over the past 12 months. Statutory earnings per share are supposed to fall 13% to ر.س1.19 in the same period. Previously, the analyst had been modelling revenues of ر.س1.2b and earnings per share (EPS) of ر.س1.44 in 2022. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a real cut to earnings per share numbers as well.

See our latest analysis for Al Hammadi Company For Development and Investment

What's most unexpected is that the consensus price target rose 5.7% to ر.س37.20, strongly implying the downgrade to forecasts is not expected to be more than a temporary blip. 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. The most optimistic Al Hammadi Company For Development and Investment analyst has a price target of ر.س42.00 per share, while the most pessimistic values it at ر.س34.00. This is a very narrow spread of estimates, implying either that Al Hammadi Company For Development and Investment is an easy company to value, or - more likely - the analyst is relying heavily on some key assumptions.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Al Hammadi Company For Development and Investment's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 10% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 11% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 9.4% per year. It's pretty clear that Al Hammadi Company For Development and Investment's revenues are expected to perform substantially worse 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 Al Hammadi Company For Development and Investment. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that Al Hammadi Company For Development and Investment's revenues are expected to grow slower than the wider market. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have analyst estimates for Al Hammadi Company For Development and Investment going out as far as 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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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.