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Market forces rained on the parade of Regis Corporation (NYSE:RGS) shareholders today, when the analysts downgraded their forecasts for next year. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
Following the downgrade, the consensus from dual analysts covering Regis is for revenues of US$314m in 2022, implying a considerable 17% decline in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing US$355m of revenue in 2022. It looks like forecasts have become a fair bit less optimistic on Regis, given the measurable cut to revenue estimates.
There was no particular change to the consensus price target of US$10.75, with Regis' latest outlook seemingly not enough to result in a change of valuation. 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 Regis at US$12.00 per share, while the most bearish prices it at US$9.50. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Regis is an easy business to forecast or the underlying assumptions are obvious.
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. One thing that stands out from these estimates is that shrinking revenues are expected to moderate over the period ending 2022 compared to the historical decline of 20% per annum over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 17% annually. So while a broad number of companies are forecast to grow, unfortunately Regis 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 cut their revenue estimates for next year. They also expect company revenue to perform worse than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Regis after today.
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 Regis' financials, such as a short cash runway. Learn more, and discover the 1 other risk we've identified, for 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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