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The latest analyst coverage could presage a bad day for JMP Group LLC (NYSE:JMP), with the covering analyst 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 analyst factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the most recent consensus for JMP Group from its sole analyst is for revenues of US$88m in 2020 which, if met, would be a solid 13% increase on its sales over the past 12 months. The losses are expected to disappear over the next year or so, with forecasts for a profit of US$0.10 per share this year. Prior to this update, the analyst had been forecasting revenues of US$124m and earnings per share (EPS) of US$0.35 in 2020. It looks like analyst sentiment has declined substantially, with a pretty serious reduction to revenue estimates and a pretty serious decline to earnings per share numbers as well.
The consensus price target fell 30% to US$3.50, with the weaker earnings outlook clearly leading analyst valuation estimates.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. For example, we noticed that JMP Group's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 13%, well above its historical decline of 8.7% a year over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 3.8% next year. So it looks like JMP Group is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The biggest issue in the new estimates is that the analyst has reduced their earnings per share estimates, suggesting business headwinds lay ahead for JMP Group. While the analyst did downgrade their revenue estimates, these forecasts still imply revenues will perform better 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 JMP Group.
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 JMP Group 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.
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