The analysts covering Amplifon SpA (BIT:AMP) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.
Following the latest downgrade, the current consensus, from the eleven analysts covering Amplifon, is for revenues of €1.5b in 2020, which would reflect a definite 14% reduction in Amplifon's sales over the past 12 months. Statutory earnings per share are anticipated to crater 74% to €0.11 in the same period. Before this latest update, the analysts had been forecasting revenues of €1.7b and earnings per share (EPS) of €0.31 in 2020. Indeed, we can see that the analysts are a lot more bearish about Amplifon'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 €22.43 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. The most optimistic Amplifon analyst has a price target of €30.00 per share, while the most pessimistic values it at €13.80. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
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 revenue decline of 14%, a significant reduction from annual growth of 12% 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 5.9% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Amplifon 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 Amplifon. 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 Amplifon.
Worse, Amplifon is labouring under a substantial debt burden, which - if today's forecasts prove accurate - the forecast downgrade could potentially exacerbate. You can learn more about our debt analysis for free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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