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The analysts covering Sabre Insurance Group plc (LON:SBRE) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon. Investors however, have been notably more optimistic about Sabre Insurance Group recently, with the stock price up a noteworthy 10% to UK£1.20 in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.
Following the downgrade, the latest consensus from Sabre Insurance Group's seven analysts is for revenues of UK£193m in 2022, which would reflect a sizeable 23% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to decline 20% to UK£0.05 in the same period. Before this latest update, the analysts had been forecasting revenues of UK£217m and earnings per share (EPS) of UK£0.064 in 2022. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.
It'll come as no surprise then, to learn that the analysts have cut their price target 13% to UK£1.68. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Sabre Insurance Group at UK£2.36 per share, while the most bearish prices it at UK£1.20. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying 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. For example, we noticed that Sabre Insurance Group's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 51% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 5.3% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 11% per year. Not only are Sabre Insurance Group's revenues expected to improve, it seems that the analysts are also expecting it 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. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform 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.
So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Sabre Insurance Group, including its declining profit margins. For more information, you can click here to discover this and the 2 other warning signs we've identified.
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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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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