Things Look Grim For Watkin Jones Plc (LON:WJG) After Today's Downgrade
Today is shaping up negative for Watkin Jones Plc (LON:WJG) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.
Following the downgrade, the current consensus from Watkin Jones' six analysts is for revenues of UK£480m in 2023 which - if met - would reflect a substantial 30% increase on its sales over the past 12 months. Statutory earnings per share are expected to be UK£0.10, roughly flat on the last 12 months. Previously, the analysts had been modelling revenues of UK£547m and earnings per share (EPS) of UK£0.14 in 2023. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.
See our latest analysis for Watkin Jones
It'll come as no surprise then, to learn that the analysts have cut their price target 6.1% to UK£1.63. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Watkin Jones at UK£2.47 per share, while the most bearish prices it at UK£0.93. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
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. It's clear from the latest estimates that Watkin Jones' rate of growth is expected to accelerate meaningfully, with the forecast 70% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 3.4% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 2.4% annually. It seems obvious that as part of the brighter growth outlook, Watkin Jones is expected to grow faster than 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. Sadly they also cut their revenue estimates, although at least the company is expected to perform a bit better 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.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Watkin Jones analysts - going out to 2025, 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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