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The analysts covering Matrix Service Company (NASDAQ:MTRX) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.
Following the latest downgrade, the current consensus, from the dual analysts covering Matrix Service, is for revenues of US$750m in 2021, which would reflect a discernible 5.5% reduction in Matrix Service's sales over the past 12 months. Losses are predicted to fall substantially, shrinking 85% to US$0.10. Before this latest update, the analysts had been forecasting revenues of US$871m and earnings per share (EPS) of US$0.23 in 2021. So we can see that the consensus has become notably more bearish on Matrix Service'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 6.5% to US$16.50, clearly signalling that the weaker revenue and EPS outlook are not expected to weigh on the stock over the longer term. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Matrix Service at US$17.00 per share, while the most bearish prices it at US$16.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. One more thing stood out to us about these estimates, and it's the idea that Matrix Service'sdecline is expected to accelerate, with revenues forecast to fall 5.5% next year, topping off a historical decline of 3.2% 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 6.9% per year. So while a broad number of companies are forecast to grow, unfortunately Matrix Service is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most important thing to take away is that analysts are expecting Matrix Service to become unprofitable this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Matrix Service's revenues are expected to grow slower than the wider market. 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.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have analyst estimates for Matrix Service going out as far as 2022, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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