The latest analyst coverage could presage a bad day for Turners Automotive Group Limited (NZSE:TRA), with the covering analyst making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as the analyst factored in the latest outlook for the business, concluding that they were too optimistic previously. Bidders are definitely seeing a different story, with the stock price of NZ$2.12 reflecting a 13% rise in the past week. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.
Following the latest downgrade, the current consensus, from the sole analyst covering Turners Automotive Group, is for revenues of NZ$298m in 2021, which would reflect an uncomfortable 10% reduction in Turners Automotive Group's sales over the past 12 months. Statutory earnings per share are anticipated to plunge 27% to NZ$0.18 in the same period. Previously, the analyst had been modelling revenues of NZ$359m and earnings per share (EPS) of NZ$0.26 in 2021. Indeed, we can see that the analyst is a lot more bearish about Turners Automotive Group's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
The consensus price target fell 20% to US$1.46, with the weaker earnings outlook clearly leading analyst valuation estimates.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 10%, a significant reduction from annual growth of 19% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 6.8% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Turners Automotive Group is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analyst 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. After such a stark change in sentiment from the analyst, we'd understand if readers now felt a bit wary of Turners Automotive Group.
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.
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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. Thank you for reading.