Yahoo Finance Analysts Just Made A Major Revision To Their Softcat plc (LON:SCT) Revenue Forecasts
One thing we could say about the analysts on Softcat plc (LON:SCT) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
Following the downgrade, the current consensus from Softcat's nine analysts is for revenues of UK£1.2b in 2023 which - if met - would reflect a modest 7.5% increase on its sales over the past 12 months. Statutory earnings per share are supposed to shrink 2.5% to UK£0.54 in the same period. Previously, the analysts had been modelling revenues of UK£1.3b and earnings per share (EPS) of UK£0.54 in 2023. So there's been a clear change in analyst sentiment in the recent update, with the analysts making a substantial drop in revenues and reconfirming their earnings per share estimates.
Check out our latest analysis for Softcat
It will come as no surprise then, that the consensus price target fell 5.5% to UK£15.18 following these changes. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Softcat at UK£20.10 per share, while the most bearish prices it at UK£11.50. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Softcat's revenue growth is expected to slow, with the forecast 7.5% annualised growth rate until the end of 2023 being well below the historical 9.6% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 17% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Softcat.
The Bottom Line
The most obvious conclusion from this consensus update is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Softcat going forwards.
As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Softcat's financials, such as concerns around earnings quality. Learn more, and discover the 1 other warning sign 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
