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One thing we could say about the analysts on Twin Disc, Incorporated (NASDAQ:TWIN) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the consensus from two analysts covering Twin Disc is for revenues of US$223m in 2020, implying a considerable 17% decline in sales compared to the last 12 months. Per-share losses are expected to explode, reaching US$1.47 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$255m and losses of US$0.73 per share in 2020. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
The consensus price target fell 19% to US$11.00, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Twin Disc, with the most bullish analyst valuing it at US$12.00 and the most bearish at US$10.00 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Twin Disc's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 17% revenue decline a notable change from historical growth of 5.2% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 0.6% annually for the foreseeable future. It's pretty clear that Twin Disc's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Twin Disc. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Twin Disc's revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Twin Disc.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for Twin Disc going out as far as 2021, 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.
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