Yahoo Finance This Analyst Just Downgraded Their Ecofibre Limited (ASX:EOF) EPS Forecasts
The latest analyst coverage could presage a bad day for Ecofibre Limited (ASX:EOF), with the covering analyst making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as the analyst factored in the latest outlook for the business, concluding that they were too optimistic previously.
After this downgrade, Ecofibre's one analyst is now forecasting revenues of AU$60m in 2021. This would be a solid 18% improvement in sales compared to the last 12 months. Statutory earnings per share are anticipated to crater 92% to AU$0.0037 in the same period. Before this latest update, the analyst had been forecasting revenues of AU$87m and earnings per share (EPS) of AU$0.045 in 2021. It looks like analyst sentiment has declined substantially, with a sizeable cut to revenue estimates and a pretty serious decline to earnings per share numbers as well.
View our latest analysis for Ecofibre
It'll come as no surprise then, to learn that the analyst has cut their price target 29% to AU$2.26.
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. It's pretty clear that there is an expectation that Ecofibre's revenue growth will slow down substantially, with revenues next year expected to grow 18%, compared to a historical growth rate of 71% over the past three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 36% per year. Factoring in the forecast slowdown in growth, it seems obvious that Ecofibre is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that the analyst cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Ecofibre.
That said, this broker might have good reason to be negative on Ecofibre, given dilutive stock issuance over the past year. Learn more, and discover the 3 other flags we've identified, 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.
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. 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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