U.S. markets close in 5 hours

Analysts Have Been Trimming Their Geox S.p.A. Price Target After Its Latest Report

Simply Wall St

Shareholders in Geox S.p.A. (BIT:GEO) had a terrible week, as shares crashed 27% to €0.67 in the week since its latest full-year results. It was an okay report, and revenues came in at €806m, approximately in line with analyst estimates leading up to the results announcement. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for Geox

BIT:GEO Past and Future Earnings, March 8th 2020

Taking into account the latest results, the four analysts covering Geox provided consensus estimates of €732.9m revenue in 2020, which would reflect a chunky 9.1% decline on its sales over the past 12 months. Earnings are expected to improve, with Geox forecast to report a statutory profit of €0.02 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of €835.4m and earnings per share (EPS) of €0.02 in 2020. So there's been a clear change in analyst sentiment after these results, with analysts making a real cut to to revenues and reconfirming their earnings per share estimates.

The average analyst price target was reduced 5.6% to €1.01, with the lower revenue forecasts indicating negative sentiment towards Geox, even though earnings forecasts were unchanged. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Geox at €1.60 per share, while the most bearish prices it at €0.70. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. One thing that stands out from these estimates is that, even though revenues are forecast to keep falling, the decline is expected to accelerate. Analysts have modelled a 9.1% decline next year, compared to a historical decline of 0.9% per annum for the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the market are forecast to see their revenue decline 4.7% per year. It seems clear that while revenues are expected to continue declining, analysts also expect the downturn to be more severe than that of the wider market.

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. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Geox going out to 2022, and you can see them free on our platform here.

We also provide an overview of the Geox Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.