One thing we could say about the analysts on Savills plc (LON:SVS) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
After the downgrade, the consensus from Savills' four analysts is for revenues of UK£1.7b in 2020, which would reflect an uneasy 11% decline in sales compared to the last year of performance. Before the latest update, the analysts were foreseeing UK£1.9b of revenue in 2020. It looks like forecasts have become a fair bit less optimistic on Savills, given the measurable cut to revenue estimates.
We'd point out that there was no major changes to their price target of UK£10.93, suggesting the latest estimates were not enough to shift their view on the value of the business. 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. There are some variant perceptions on Savills, with the most bullish analyst valuing it at UK£12.30 and the most bearish at UK£8.80 per share. 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Savills' past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 11% revenue decline a notable change from historical growth of 11% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue decline 3.7% annually for the foreseeable future. So it's pretty clear that Savills' revenues are expected to shrink 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 for revenues to shrink at a quicker rate than companies in the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Savills going forwards.
Hungry for more information? At least one of Savills' four 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 email@example.com.