One thing we could say about the analysts on SATS Ltd. (SGX:S58) - 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 downgrade, the current consensus from SATS' nine analysts is for revenues of S$1.2b in 2022 which - if met - would reflect a notable 11% increase on its sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of S$1.4b in 2022. It looks like forecasts have become a fair bit less optimistic on SATS, given the measurable cut to revenue estimates.
There was no particular change to the consensus price target of S$4.31, with SATS' latest outlook seemingly not enough to result in a change of 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. The most optimistic SATS analyst has a price target of S$5.00 per share, while the most pessimistic values it at S$3.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await SATS shareholders.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the SATS' past performance and to peers in the same industry. For example, we noticed that SATS' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 11% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 1.1% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 17% per year. Although SATS' revenues are expected to improve, it seems that the analysts are still bearish on the business, forecasting it to grow slower than the broader industry.
The Bottom Line
The clear low-light was that analysts slashing their revenue forecasts for SATS this year. They're also anticipating slower revenue growth than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on SATS after today.
Want to learn more? We have estimates for SATS from its nine analysts out until 2026, 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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SATS Ltd., an investment holding company, provides gateway services and food solutions in Singapore, Japan, and internationally.
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High growth potential with mediocre balance sheet.