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Analyst Forecasts Just Became More Bearish On Domtar Corporation (NYSE:UFS)

One thing we could say about the analysts on Domtar Corporation (NYSE:UFS) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following the downgrade, the most recent consensus for Domtar from its seven analysts is for revenues of US$3.9b in 2021 which, if met, would be an okay 5.6% increase on its sales over the past 12 months. Before the latest update, the analysts were foreseeing US$4.4b of revenue in 2021. It looks like forecasts have become a fair bit less optimistic on Domtar, given the substantial drop in revenue estimates.

See our latest analysis for Domtar

earnings-and-revenue-growth
earnings-and-revenue-growth

Additionally, the consensus price target for Domtar increased 5.5% to US$37.53, showing a clear increase in optimism from the analysts involved. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Domtar at US$42.00 per share, while the most bearish prices it at US$30.32. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that Domtar's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 5.6%, well above its historical decline of 1.9% a year over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 3.0% next year. Not only are Domtar's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. They're also forecasting more rapid revenue growth than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. 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 Domtar after today.

Want to learn more? At least one of Domtar's seven analysts has provided estimates out to 2022, which can be seen for 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.

This article by Simply Wall St is general in nature. 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.

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

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