Today is shaping up negative for Walker Greenbank PLC (LON:WGB) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.
Following the latest downgrade, the current consensus, from the twin analysts covering Walker Greenbank, is for revenues of UK£78m in 2021, which would reflect a sizeable 30% reduction in Walker Greenbank's sales over the past 12 months. After this downgrade, the company is anticipated to report a loss of UK£0.10 in 2021, a sharp decline from a profit over the last year. Before this latest update, the analysts had been forecasting revenues of UK£113m and earnings per share (EPS) of UK£0.065 in 2021. There looks to have been a major change in sentiment regarding Walker Greenbank's prospects, with a pretty serious reduction to revenues and the analysts now forecasting a loss instead of a profit.
There was no major change to the consensus price target of UK£0.82, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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 Walker Greenbank, with the most bullish analyst valuing it at UK£1.10 and the most bearish at UK£0.50 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Walker Greenbank's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 30%, a significant reduction from annual growth of 7.4% 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 4.8% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Walker Greenbank is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that analysts are expecting Walker Greenbank to become unprofitable this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Walker Greenbank's revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Walker Greenbank.
Uncomfortably, our automated valuation tool also suggests that Walker Greenbank stock could be overvalued following the downgrade. Shareholders could be left disappointed if these estimates play out. Learn why, and examine the assumptions that underpin our valuation by visiting our free platform here to learn more about our valuation approach.
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.
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