Analysts Are More Bearish On Compass, Inc. (NYSE:COMP) Than They Used To Be

The analysts covering Compass, Inc. (NYSE:COMP) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

After the downgrade, the consensus from Compass' six analysts is for revenues of US$6.6b in 2022, which would reflect a measurable 2.5% decline in sales compared to the last year of performance. The loss per share is anticipated to greatly reduce in the near future, narrowing 21% to US$1.03. However, before this estimates update, the consensus had been expecting revenues of US$7.5b and US$0.78 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

View our latest analysis for Compass

The consensus price target fell 10% to US$6.06, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Compass analyst has a price target of US$7.50 per share, while the most pessimistic values it at US$4.20. 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 Compass shareholders.

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 4.9% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 23% over the last year. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 6.2% annually for the foreseeable future. It's pretty clear that Compass' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Compass.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Compass analysts - going out to 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.