Watkin Jones Plc (LON:WJG) Analysts Just Cut Their EPS Forecasts
The latest analyst coverage could presage a bad day for Watkin Jones Plc (LON:WJG), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
After this downgrade, Watkin Jones' six analysts are now forecasting revenues of UK£426m in 2023. This would be a solid 16% improvement in sales compared to the last 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of UK£0.13 per share in 2023. Previously, the analysts had been modelling revenues of UK£480m and earnings per share (EPS) of UK£0.083 in 2023. So we can see that the consensus has become notably more bearish on Watkin Jones' outlook with these numbers, making a substantial drop in this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.
See our latest analysis for Watkin Jones
The consensus price target fell 40% to UK£0.97, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. Currently, the most bullish analyst values Watkin Jones at UK£1.75 per share, while the most bearish prices it at UK£0.27. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the 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. It's clear from the latest estimates that Watkin Jones' rate of growth is expected to accelerate meaningfully, with the forecast 34% 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 6.5% 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 are expecting Watkin Jones to become unprofitable this year. Sadly they also cut their revenue estimates, although at least the company is expected to perform a bit better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Watkin Jones.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Watkin Jones 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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