One thing we could say about the analysts on Badger Daylighting Ltd. (TSE:BAD) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon. Surprisingly the share price has been buoyant, rising 11% to CA$25.53 in the past 7 days. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.
Following the latest downgrade, the current consensus, from the seven analysts covering Badger Daylighting, is for revenues of CA$586m in 2020, which would reflect an uneasy 11% reduction in Badger Daylighting's sales over the past 12 months. Statutory earnings per share are anticipated to tumble 24% to CA$1.27 in the same period. Before this latest update, the analysts had been forecasting revenues of CA$675m and earnings per share (EPS) of CA$1.69 in 2020. Indeed, we can see that the analysts are a lot more bearish about Badger Daylighting's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
Analysts made no major changes to their price target of CA$31.71, suggesting the downgrades are not expected to have a long-term impact on Badger Daylighting'svaluation. 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 Badger Daylighting analyst has a price target of CA$35.00 per share, while the most pessimistic values it at CA$30.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.
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 the forecast 11% revenue decline a notable change from historical growth of 12% 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 3.5% annually for the foreseeable future. The forecasts do look bearish for Badger Daylighting, since they're expecting it to shrink faster than the 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 Badger Daylighting. Unfortunately they also downgraded their revenue estimates, and our aggregation of analyst estimates suggests that Badger Daylighting revenue is expected to perform worse than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Badger Daylighting after the downgrade.
Unfortunately, the earnings downgrade - if accurate - may also place pressure on Badger Daylighting'smountain of debt, which could lead to some belt tightening for shareholders. To see more of our financial analysis, you can click through to our free platform to learn more about its balance sheet and specific concerns we've identified.
We also provide an overview of the Badger Daylighting Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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