Market forces rained on the parade of BRP Group, Inc. (NASDAQ:BRP) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon. Shares are up 8.3% to US$11.04 in the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.
Following the downgrade, the current consensus from BRP Group's five analysts is for revenues of US$211m in 2020 which - if met - would reflect a sizeable 53% increase on its sales over the past 12 months. The losses are expected to disappear over the next year or so, with forecasts for a profit of US$0.034 per share this year. Prior to this update, the analysts had been forecasting revenues of US$241m and earnings per share (EPS) of US$0.17 in 2020. Indeed, we can see that the analysts are a lot more bearish about BRP Group'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 23% to US$14.83. 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 BRP Group, with the most bullish analyst valuing it at US$20.00 and the most bearish at US$11.00 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.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that BRP Group's revenue growth is expected to slow, with forecast 53% increase next year well below the historical 73% growth over the last year. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 1.2% next year. Even after the forecast slowdown in growth, it seems obvious that BRP Group is also expected to grow faster than 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 BRP Group. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of BRP Group.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple BRP Group 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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