The latest analyst coverage could presage a bad day for Elevate Credit, Inc. (NYSE:ELVT), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. Bidders are definitely seeing a different story, with the stock price of US$2.14 reflecting a 14% rise in the past week. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.
Following the latest downgrade, the six analysts covering Elevate Credit provided consensus estimates of US$648m revenue in 2020, which would reflect a not inconsiderable 12% decline on its sales over the past 12 months. Statutory earnings per share are presumed to bounce 130% to US$0.73. Previously, the analysts had been modelling revenues of US$751m and earnings per share (EPS) of US$0.73 in 2020. 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.
The average price target was steady at US$4.38 even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Elevate Credit, with the most bullish analyst valuing it at US$6.00 and the most bearish at US$2.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Elevate Credit's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 12% revenue decline a notable change from historical growth of 15% 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 7.1% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Elevate Credit is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. 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 Elevate Credit after today.
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 Elevate Credit analysts - going out to 2022, 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.
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