Today is shaping up negative for Cairo Communication S.p.A. (BIT:CAI) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the latest downgrade, the dual analysts covering Cairo Communication provided consensus estimates of €1.0b revenue in 2020, which would reflect an uncomfortable 13% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to nosedive 94% to €0.024 in the same period. Prior to this update, the analysts had been forecasting revenues of €1.1b and earnings per share (EPS) of €0.14 in 2020. Indeed, we can see that the analysts are a lot more bearish about Cairo Communication's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
Despite the cuts to forecast earnings, there was no real change to the €2.90 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Cairo Communication at €3.30 per share, while the most bearish prices it at €2.60. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 13%, a significant reduction from annual growth of 34% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 0.4% next year. So it's pretty clear that Cairo Communication's revenues are expected to shrink faster 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 Cairo Communication. Unfortunately they also downgraded their revenue estimates, and our aggregation of analyst estimates suggests that Cairo Communication revenue is expected to perform worse than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Cairo Communication.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At least one analyst has provided forecasts out to 2021, which can be seen 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.
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