Today is shaping up negative for ASA International Group PLC (LON:ASAI) 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 this downgrade, ASA International Group's four analysts are forecasting 2020 revenues to be US$114m, approximately in line with the last 12 months. Statutory earnings per share are supposed to tumble 42% to US$0.095 in the same period. Before this latest update, the analysts had been forecasting revenues of US$127m and earnings per share (EPS) of US$0.16 in 2020. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.
Despite the cuts to forecast earnings, there was no real change to the UK£2.74 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic ASA International Group analyst has a price target of UK£3.01 per share, while the most pessimistic values it at UK£2.18. 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. From these estimates it looks as though the analysts expect the years of declining sales to come to an end, given the flat revenue forecast for next year. That would be a definite improvement, given that the past year have seen sales shrink year annually. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 22% next year. So it's pretty clear that, although revenues are improving, ASA International Group is still expected to grow slower than the 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 ASA International Group's revenues are expected to grow 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 ASA International Group.
As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with ASA International Group's financials, such as its declining profit margins. For more information, you can click here to discover this and the 1 other risk we've identified.
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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.
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