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The latest analyst coverage could presage a bad day for Ladder Capital Corp (NYSE:LADR), 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.
After the downgrade, the five analysts covering Ladder Capital are now predicting revenues of US$160m in 2021. If met, this would reflect a substantial 43% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 73% to US$0.035. Previously, the analysts had been modelling revenues of US$183m and earnings per share (EPS) of US$0.14 in 2021. So we can see that the consensus has become notably more bearish on Ladder Capital's outlook with these numbers, making a substantial drop in this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.
The consensus price target lifted 6.3% to US$12.67, clearly signalling that the weaker revenue and EPS outlook are not expected to weigh on the stock over the longer term. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Ladder Capital at US$14.00 per share, while the most bearish prices it at US$10.00. 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.
Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that Ladder Capital's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 43% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 5.6% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 36% per year. So it looks like Ladder Capital is expected to grow at about the same rate as the wider industry.
The Bottom Line
The most important thing to take away is that analysts are expecting Ladder Capital to become unprofitable this year. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.
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 Ladder Capital's financials, such as the risk of cutting its dividend. For more information, you can click here to discover this and the 2 other flags 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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