The latest analyst coverage could presage a bad day for Groupe Gorgé SA (EPA:GOE), with the analysts 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 analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. At €12.74, shares are up 8.9% 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 Groupe Gorgé's twin analysts is for revenues of €266m in 2020, which would reflect a perceptible 3.1% decline in sales compared to the last year of performance. The losses are expected to disappear over the next year or so, with forecasts for a profit of €0.24 per share this year. Previously, the analysts had been modelling revenues of €319m and earnings per share (EPS) of €0.75 in 2020. Indeed, we can see that the analysts are a lot more bearish about Groupe Gorgé's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
The consensus price target fell 9.2% to €17.38, with the weaker earnings outlook clearly leading analyst valuation estimates. 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. There are some variant perceptions on Groupe Gorgé, with the most bullish analyst valuing it at €18.50 and the most bearish at €15.50 per share. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.
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 3.1% revenue decline a notable change from historical growth of 3.8% 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 5.1% annually for the foreseeable future. It's pretty clear that Groupe Gorgé's revenues are expected to perform substantially worse than 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 Groupe Gorgé. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Groupe Gorgé.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have analyst estimates for Groupe Gorgé going out as far as 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.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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