Yahoo Finance One Duxton Water Limited (ASX:D2O) Broker Analyst Just Cut Their Revenue Numbers By 25%
The latest analyst coverage could presage a bad day for Duxton Water Limited (ASX:D2O), 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) forecasts went under the knife, suggesting the analyst has soured majorly on the business.
Following the latest downgrade, the solitary analyst covering Duxton Water provided consensus estimates of AU$36m revenue in 2020, which would reflect a painful 29% decline on its sales over the past 12 months. After this downgrade, the company is anticipated to report a loss of AU$0.001 in 2020, a sharp decline from a profit over the last year. Previously, the analyst had been modelling revenues of AU$48m and earnings per share (EPS) of AU$0.064 in 2020. So we can see that the consensus has become notably more bearish on Duxton Water's outlook with these numbers, making a sizeable cut to this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.
View our latest analysis for Duxton Water
The analyst lifted their price target 32% to AU$1.45, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Duxton Water's past performance and to peers in the same industry. We would also point out that the forecast 29% revenue decline is better than the historical trend, which saw revenues shrink 41% annually over the past year
The Bottom Line
The most important thing to take away is that the analyst is expecting Duxton Water to become unprofitable this year. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that Duxton Water's revenues are expected to grow slower than the wider market. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.
There might be good reason for analyst bearishness towards Duxton Water, like the risk of cutting its dividend. For more information, you can click here to discover this and the 2 other flags we've identified.
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.
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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