Yahoo Finance Analyst Forecasts Just Got A Whole Lot More Bearish On Burford Capital Limited (LON:BUR)
One thing we could say about the analysts on Burford Capital Limited (LON:BUR) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic. At US$4.80, shares are up 10.0% in the past 7 days. It will be interesting to see if this downgrade motivates investors to start selling their holdings.
Following the downgrade, the latest consensus from Burford Capital's five analysts is for revenues of US$525m in 2020, which would reflect a sizeable 44% improvement in sales compared to the last 12 months. Per-share earnings are expected to jump 148% to US$2.41. Prior to this update, the analysts had been forecasting revenues of US$813m and earnings per share (EPS) of US$2.41 in 2020. So there's been a clear change in analyst sentiment in the recent update, with the analysts making a pretty serious reduction to revenues and reconfirming their earnings per share estimates.
View our latest analysis for Burford Capital
The consensus has reconfirmed its price target of US$16.54, showing that the analysts don't expect weaker sales expectationsthis year to have a material impact on Burford Capital's market value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Burford Capital analyst has a price target of US$32.33 per share, while the most pessimistic values it at US$6.21. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Burford Capital's rate of growth is expected to accelerate meaningfully, with the forecast 44% revenue growth noticeably faster than its historical growth of 35% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 2.2% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Burford Capital to grow faster than the wider industry.
The Bottom Line
The most obvious conclusion from this consensus update is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Burford Capital after today.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Burford Capital going out to 2022, 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 editorial-team@simplywallst.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.
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