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Analysts Just Made A Major Revision To Their Computacenter plc (LON:CCC) Revenue Forecasts

·3 min read

Market forces rained on the parade of Computacenter plc (LON:CCC) 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.

Following the latest downgrade, the current consensus, from the seven analysts covering Computacenter, is for revenues of UK£5.9b in 2022, which would reflect a considerable 17% reduction in Computacenter's sales over the past 12 months. Statutory earnings per share are expected to be UK£1.58, roughly flat on the last 12 months. Before this latest update, the analysts had been forecasting revenues of UK£7.2b and earnings per share (EPS) of UK£1.59 in 2022. 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.

See our latest analysis for Computacenter

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

The consensus has reconfirmed its price target of UK£30.28, showing that the analysts don't expect weaker sales expectationsthis year to have a material impact on Computacenter's market value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Computacenter analyst has a price target of UK£36.00 per share, while the most pessimistic values it at UK£25.90. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that sales are expected to reverse, with a forecast 30% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 13% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 16% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Computacenter is expected to lag 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. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales 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 Computacenter after today.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Computacenter going out to 2024, 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.

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.

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