Market forces rained on the parade of Kinepolis Group NV (EBR:KIN) shareholders today, when the analysts downgraded their forecasts for this year. 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 the downgrade, the consensus from three analysts covering Kinepolis Group is for revenues of €479m in 2020, implying a definite 13% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to crater 34% to €1.33 in the same period. Prior to this update, the analysts had been forecasting revenues of €554m and earnings per share (EPS) of €1.97 in 2020. Indeed, we can see that the analysts are a lot more bearish about Kinepolis Group's prospects, administering a measurable cut to 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 12% to €53.25. 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 Kinepolis Group analyst has a price target of €59.00 per share, while the most pessimistic values it at €45.00. This is a very narrow spread of estimates, implying either that Kinepolis Group is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 13%, a significant reduction from annual growth of 15% 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 8.7% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Kinepolis Group is expected to lag 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 Kinepolis Group's 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 Kinepolis Group.
A high debt burden combined with a downgrade of this magnitude always gives us some reason for concern, especially if these forecasts are just the first sign of a business downturn. See why we're concerned about Kinepolis Group's balance sheet by visiting our risks dashboard for free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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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