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Today is shaping up negative for The Hackett Group, Inc. (NASDAQ:HCKT) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the consensus from three analysts covering Hackett Group is for revenues of US$250m in 2020, implying a noticeable 4.8% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to crater 51% to US$0.36 in the same period. Prior to this update, the analysts had been forecasting revenues of US$287m and earnings per share (EPS) of US$0.88 in 2020. Indeed, we can see that the analysts are a lot more bearish about Hackett Group's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
The consensus price target fell 7.9% to US$19.33, with the weaker earnings outlook clearly leading analyst valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Hackett Group at US$20.00 per share, while the most bearish prices it at US$18.00. This is a very narrow spread of estimates, implying either that Hackett Group is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 4.8% revenue decline a notable change from historical growth of 2.9% 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 11% next year. It's pretty clear that Hackett Group's revenues are expected to perform substantially worse 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. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Hackett Group's revenues are expected to grow 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 Hackett Group.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Hackett Group going out to 2021, 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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