Time To Worry? Analysts Just Downgraded Their Perimeter Solutions, SA (NYSE:PRM) Outlook

Market forces rained on the parade of Perimeter Solutions, SA (NYSE:PRM) shareholders today, when the analysts downgraded their forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic. The stock price has risen 8.9% to US$5.99 over the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

Following this downgrade, Perimeter Solutions' dual analysts are forecasting 2023 revenues to be US$320m, approximately in line with the last 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$0.22 per share in 2023. Yet before this consensus update, the analysts had been forecasting revenues of US$370m and losses of US$0.24 per share in 2023. We can see there's definitely been a change in sentiment in this update, with the analysts administering a meaningful downgrade to this year's revenue estimates, while at the same time reducing their loss estimates.

View our latest analysis for Perimeter Solutions

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. One thing that stands out from these estimates is that shrinking revenues are expected to moderate over the period ending 2023 compared to the historical decline of 20% per annum over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 4.3% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Perimeter Solutions to suffer worse than the wider industry.

The Bottom Line

Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Perimeter Solutions' revenues are expected to grow slower 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 Perimeter Solutions after today.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have analyst estimates for Perimeter Solutions going out as far as 2025, 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.