One thing we could say about the analysts on Brilliant Earth Group, Inc. (NASDAQ:BRLT) - 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 downgrade, the latest consensus from Brilliant Earth Group's nine analysts is for revenues of US$525m in 2023, which would reflect a solid 19% improvement in sales compared to the last 12 months. Statutory earnings per share are anticipated to shrink 9.0% to US$0.24 in the same period. Before this latest update, the analysts had been forecasting revenues of US$590m and earnings per share (EPS) of US$0.34 in 2023. Indeed, we can see that the analysts are a lot more bearish about Brilliant Earth Group's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
Despite the cuts to forecast earnings, there was no real change to the US$10.63 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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 Brilliant Earth Group, with the most bullish analyst valuing it at US$16.00 and the most bearish at US$8.00 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.
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 Brilliant Earth Group's revenue growth is expected to slow, with the forecast 15% annualised growth rate until the end of 2023 being well below the historical 28% p.a. growth over the last three years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 6.0% per year. Even after the forecast slowdown in growth, it seems obvious that Brilliant Earth Group is also expected to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better 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 Brilliant Earth Group after the downgrade.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Brilliant Earth Group analysts - going out to 2024, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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