One Moelis Australia Limited (ASX:MOE) Analyst Just Made A Major Cut To Next Year's Estimates
Today is shaping up negative for Moelis Australia Limited (ASX:MOE) shareholders, with the covering analyst delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analyst seeing grey clouds on the horizon. Surprisingly the share price has been buoyant, rising 11% to AU$3.54 in the past 7 days. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.
Following the latest downgrade, the current consensus, from the single analyst covering Moelis Australia, is for revenues of AU$146m in 2020, which would reflect a measurable 2.8% reduction in Moelis Australia's sales over the past 12 months. Statutory earnings per share are presumed to jump 24% to AU$0.19. Prior to this update, the analyst had been forecasting revenues of AU$170m and earnings per share (EPS) of AU$0.28 in 2020. Indeed, we can see that the analyst is a lot more bearish about Moelis Australia's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
View our latest analysis for Moelis Australia
It'll come as no surprise then, to learn that the analyst has cut their price target 21% to AU$4.65.
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 2.8%, a significant reduction from annual growth of 24% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.8% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Moelis Australia is expected to lag the wider industry.
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 Moelis Australia. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
In light of the downgrade, our automated discounted cash flow valuation tool suggests that Moelis Australia could now be moderately overvalued. Learn why, and examine the assumptions that underpin our valuation by visiting our free platform here to learn more about our valuation approach.
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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