Today is shaping up negative for HireRight Holdings Corporation (NYSE:HRT) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.
Following the downgrade, the consensus from ten analysts covering HireRight Holdings is for revenues of US$759m in 2023, implying an uncomfortable 8.5% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to tumble 41% to US$0.86 in the same period. Previously, the analysts had been modelling revenues of US$870m and earnings per share (EPS) of US$1.86 in 2023. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.
The consensus price target fell 22% to US$15.00, with the weaker earnings outlook clearly leading analyst valuation estimates. 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 HireRight Holdings analyst has a price target of US$22.00 per share, while the most pessimistic values it at US$9.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
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. We would highlight that sales are expected to reverse, with a forecast 6.9% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 14% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 6.2% annually for the foreseeable future. It's pretty clear that HireRight Holdings' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts 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. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of HireRight Holdings.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple HireRight Holdings analysts - going out to 2024, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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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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