Today is shaping up negative for Barco NV (EBR:BAR) shareholders, with the analysts delivering a substantial negative revision to this year’s forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. Shares are up 5.3% to €127 in the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.
Following the latest downgrade, the three analysts covering Barco provided consensus estimates of €996m revenue in 2020, which would reflect an uncomfortable 8.0% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to descend 18% to €6.20 in the same period. Before this latest update, the analysts had been forecasting revenues of €1.2b and earnings per share (EPS) of €9.31 in 2020. Indeed, we can see that the analysts are a lot more bearish about Barco’s prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
It’ll come as no surprise then, to learn that the analysts have cut their price target 20% to €210. 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. The most optimistic Barco analyst has a price target of €265 per share, while the most pessimistic values it at €175. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
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. We would highlight that sales are expected to reverse, with the forecast 8.0% revenue decline a notable change from historical growth of 1.6% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.3% next year. It’s pretty clear that Barco’s revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Barco. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Barco’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 Barco.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates – from multiple Barco analysts – going out to 2024, 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.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
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