Analysts Just Made A Major Revision To Their Home Point Capital Inc. (NASDAQ:HMPT) Revenue Forecasts

The latest analyst coverage could presage a bad day for Home Point Capital Inc. (NASDAQ:HMPT), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. 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 nine analysts covering Home Point Capital, is for revenues of US$1.1b in 2021, which would reflect a stressful 20% reduction in Home Point Capital's sales over the past 12 months. Statutory earnings per share are anticipated to crater 41% to US$2.60 in the same period. Prior to this update, the analysts had been forecasting revenues of US$1.4b and earnings per share (EPS) of US$2.65 in 2021. Indeed we can see that the consensus opinion has undergone some fundamental changes following the recent consensus updates, with a measurable cut to revenues and some minor tweaks to earnings numbers.

See our latest analysis for Home Point Capital

The consensus price target was reduced 8.5% to US$13.45, with the lower revenue forecasts indicating negative sentiment towards Home Point Capital, even though earnings forecasts were unchanged. 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. Currently, the most bullish analyst values Home Point Capital at US$18.00 per share, while the most bearish prices it at US$10.00. 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with a forecast 26% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 454% over the last year. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue decline 3.8% annually for the foreseeable future. So it's pretty clear that Home Point Capital's revenues are expected to shrink faster than the wider 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. Unfortunately they also cut their revenue estimates for this year, and they expect sales to lag the wider market. That said, earnings per share are more important for creating value for shareholders. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Home Point Capital's future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Home Point Capital going forwards.

There might be good reason for analyst bearishness towards Home Point Capital, like concerns around earnings quality. For more information, you can click here to discover this and the 1 other flag we've identified.

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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