Clover Corporation Limited (ASX:CLV) Analysts Are More Bearish Than They Used To Be
One thing we could say about the analysts on Clover Corporation Limited (ASX:CLV) - 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 analysts have soured majorly on the business. Investors however, have been notably more optimistic about Clover recently, with the stock price up an extraordinary 31% to AU$1.75 in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.
Following the downgrade, the consensus from dual analysts covering Clover is for revenues of AU$64m in 2021, implying a not inconsiderable 19% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to plunge 30% to AU$0.043 in the same period. Previously, the analysts had been modelling revenues of AU$78m and earnings per share (EPS) of AU$0.054 in 2021. Indeed, we can see that the analysts are a lot more bearish about Clover's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
Check out our latest analysis for Clover
Despite the cuts to forecast earnings, there was no real change to the AU$2.19 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Clover, with the most bullish analyst valuing it at AU$2.37 and the most bearish at AU$2.00 per share. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 35% by the end of 2021. This indicates a significant reduction from annual growth of 18% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.1% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Clover is expected to lag 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. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales 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 Clover.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At least one analyst has provided forecasts out to 2023, which can be seen for 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.
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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