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Time To Worry? Analysts Just Downgraded Their Ellington Financial Inc. (NYSE:EFC) Outlook

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Market forces rained on the parade of Ellington Financial Inc. (NYSE:EFC) shareholders today, when the analysts downgraded their forecasts for next year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

After the downgrade, the five analysts covering Ellington Financial are now predicting revenues of US$182m in 2021. If met, this would reflect a sizeable improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of US$210m in 2021. It looks like forecasts have become a fair bit less optimistic on Ellington Financial, given the measurable cut to revenue estimates.

Check out our latest analysis for Ellington Financial

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We'd point out that there was no major changes to their price target of US$15.13, suggesting the latest estimates were not enough to shift their view on the value of the business. 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 Ellington Financial at US$17.00 per share, while the most bearish prices it at US$13.25. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Ellington Financial is an easy business to forecast or the underlying assumptions are obvious.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Ellington Financial's past performance and to peers in the same industry. One thing stands out from these estimates, which is that Ellington Financial is forecast to grow faster in the future than it has in the past, with revenues expected to grow many times over. If achieved, this would be a much better result than the 17% annual decline 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 23% per year. Not only are Ellington Financial'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 revenue estimates for next year. The analysts also expect revenues to grow faster than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on Ellington Financial after today.

That said, the analysts might have good reason to be negative on Ellington Financial, given dilutive stock issuance over the past year. Learn more, and discover the 2 other concerns 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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