One thing we could say about the analysts on GP Strategies Corporation (NYSE:GPX) - 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. At US$6.18, shares are up 5.3% in the past 7 days. It will be interesting to see if this downgrade motivates investors to start selling their holdings.
After the downgrade, the consensus from GP Strategies' three analysts is for revenues of US$498m in 2020, which would reflect a not inconsiderable 13% decline in sales compared to the last year of performance. Statutory earnings per share are supposed to dive 78% to US$0.18 in the same period. Prior to this update, the analysts had been forecasting revenues of US$581m and earnings per share (EPS) of US$0.70 in 2020. Indeed, we can see that the analysts are a lot more bearish about GP Strategies' prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
It'll come as no surprise then, to learn that the analysts have cut their price target 42% to US$8.17. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values GP Strategies at US$10.00 per share, while the most bearish prices it at US$6.50. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with the forecast 13% revenue decline a notable change from historical growth of 3.1% 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 6.1% next year. It's pretty clear that GP Strategies' 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 GP Strategies' 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 GP Strategies.
There might be good reason for analyst bearishness towards GP Strategies, like dilutive stock issuance over the past year. For more information, you can click here to discover this and the 3 other concerns we've identified.
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. 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.