What Does The Future Hold For The SPAR Group Ltd (JSE:SPP)? These Analysts Have Been Cutting Their Estimates

Market forces rained on the parade of The SPAR Group Ltd (JSE:SPP) 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.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

After the downgrade, the consensus from SPAR Group's six analysts is for revenues of R133b in 2025, which would reflect a definite 12% decline in sales compared to the last year of performance. Per-share earnings are expected to soar 21% to R9.83. Before this latest update, the analysts had been forecasting revenues of R155b and earnings per share (EPS) of R10.02 in 2025. Indeed we can see that the consensus opinion has undergone some fundamental changes following the recent consensus updates, with a substantial drop in revenues and some minor tweaks to earnings numbers.

Check out our latest analysis for SPAR Group

The average price target was steady at R145 even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings.

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 22% annualised revenue decline to the end of 2025. That is a notable change from historical growth of 5.0% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 7.8% annually for the foreseeable future. It's pretty clear that SPAR Group's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most obvious conclusion from this consensus update is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that SPAR Group's revenues are expected to grow slower than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of SPAR Group going forwards.

Unfortunately, the earnings downgrade - if accurate - may also place pressure on SPAR Group's mountain of debt, which could lead to some belt tightening for shareholders. See why we're concerned about SPAR Group's balance sheet by visiting our risks dashboard for free on our platform here.

You can also see our analysis of SPAR Group's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.