One thing we could say about the analysts on Home Point Capital Inc. (NASDAQ:HMPT) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.
Following the latest downgrade, the current consensus, from the eight analysts covering Home Point Capital, is for revenues of US$862m in 2021, which would reflect a substantial 46% reduction in Home Point Capital's sales over the past 12 months. Statutory earnings per share are supposed to dive 82% to US$0.67 in the same period. Previously, the analysts had been modelling revenues of US$1.0b and earnings per share (EPS) of US$1.33 in 2021. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.
The consensus price target fell 13% to US$7.15, with the weaker earnings outlook clearly leading analyst valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Home Point Capital, with the most bullish analyst valuing it at US$12.50 and the most bearish at US$4.50 per share. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with a forecast 70% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 97% over the last year. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 2.9% per year. So it's pretty clear that Home Point Capital's revenues are expected to shrink faster than the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Home Point Capital. 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. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Home Point Capital.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Home Point Capital 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.
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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.
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