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One thing we could say about the analysts on TPG RE Finance Trust, Inc. (NYSE:TRTX) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. 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 current consensus, from the five analysts covering TPG RE Finance Trust, is for revenues of US$153m in 2020, which would reflect a definite 8.5% reduction in TPG RE Finance Trust's sales over the past 12 months. Statutory earnings per share are supposed to dive 64% to US$0.63 in the same period. Before this latest update, the analysts had been forecasting revenues of US$173m and earnings per share (EPS) of US$1.67 in 2020. Indeed, we can see that the analysts are a lot more bearish about TPG RE Finance Trust'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$12.58. 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 TPG RE Finance Trust, with the most bullish analyst valuing it at US$22.00 and the most bearish at US$4.00 per share. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the 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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 8.5%, a significant reduction from annual growth of 18% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 23% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - TPG RE Finance Trust 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 TPG RE Finance Trust. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of TPG RE Finance Trust.
There might be good reason for analyst bearishness towards TPG RE Finance Trust, like dilutive stock issuance over the past year. Learn more, and discover the 2 other risks we've identified, for free on our platform here.
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