Yahoo Finance Analyst Forecasts Just Became More Bearish On Avon Rubber p.l.c. (LON:AVON)
The analysts covering Avon Rubber p.l.c. (LON:AVON) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
Following the downgrade, the current consensus from Avon Rubber's eight analysts is for revenues of UK£247m in 2021 which - if met - would reflect a major 47% increase on its sales over the past 12 months. Before the latest update, the analysts were foreseeing UK£258m of revenue in 2021. It looks like the analysts have become a bit less bullish on Avon Rubber, given the modest decline in revenue estimates after the latest consensus updates.
View our latest analysis for Avon Rubber
Notably, the analysts have cut their price target 5.4% to UK£37.94, suggesting concerns around Avon Rubber's valuation. 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. The most optimistic Avon Rubber analyst has a price target of UK£41.80 per share, while the most pessimistic values it at UK£34.80. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting Avon Rubber's growth to accelerate, with the forecast 47% growth ranking favourably alongside historical growth of 5.4% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 4.7% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Avon Rubber is expected to grow much faster than its industry.
The Bottom Line
The clear low-light was that analysts slashing their revenue forecasts for Avon Rubber this year. They're also forecasting more rapid revenue growth than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Avon Rubber's future valuation. 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 Avon Rubber after today.
That said, the analysts might have good reason to be negative on Avon Rubber, given its declining profit margins. Learn more, and discover the 2 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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