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The analysts covering Clover Corporation Limited (ASX:CLV) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.
Following the latest downgrade, the dual analysts covering Clover provided consensus estimates of AU$78m revenue in 2021, which would reflect a considerable 12% decline on its sales over the past 12 months. Statutory earnings per share are supposed to plummet 28% to AU$0.054 in the same period. Previously, the analysts had been modelling revenues of AU$92m and earnings per share (EPS) of AU$0.072 in 2021. Indeed, we can see that the analysts are a lot more bearish about Clover's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
It'll come as no surprise then, to learn that the analysts have cut their price target 14% to AU$2.29. 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. The most optimistic Clover analyst has a price target of AU$2.47 per share, while the most pessimistic values it at AU$2.10. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 12%, a significant reduction from annual growth of 20% 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 6.6% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Clover is expected to lag the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Clover. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2023, which can be seen for free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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.
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