Today is shaping up negative for Ranpak Holdings Corp. (NYSE:PACK) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
Following the latest downgrade, the four analysts covering Ranpak Holdings provided consensus estimates of US$341m revenue in 2022, which would reflect a considerable 9.2% decline on its sales over the past 12 months. Before the latest update, the analysts were foreseeing US$401m of revenue in 2022. The consensus view seems to have become more pessimistic on Ranpak Holdings, noting the substantial drop in revenue estimates in this update.
The consensus price target fell 9.6% to US$18.80, with the analysts clearly less optimistic about Ranpak Holdings' valuation following this update. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Ranpak Holdings, with the most bullish analyst valuing it at US$30.00 and the most bearish at US$13.00 per share. 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.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with a forecast 17% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 15% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 3.0% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Ranpak Holdings is expected to lag the wider industry.
The Bottom Line
The clear low-light was that analysts slashing their revenue forecasts for Ranpak Holdings this year. They also expect company revenue to perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Ranpak Holdings' future valuation. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Ranpak Holdings going forwards.
Hungry for more information? At least one of Ranpak Holdings' four analysts has provided estimates out to 2024, which can be seen 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.
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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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