Yahoo Finance Downgrade: Here's How Analysts See Temenos AG (VTX:TEMN) Performing In The Near Term
The analysts covering Temenos AG (VTX:TEMN) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.
Following this downgrade, Temenos' 14 analysts are forecasting 2020 revenues to be US$950m, approximately in line with the last 12 months. Statutory earnings per share are presumed to step up 10% to US$2.45. Previously, the analysts had been modelling revenues of US$1.1b and earnings per share (EPS) of US$2.78 in 2020. Indeed, we can see that the analysts are a lot more bearish about Temenos' prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
Check out our latest analysis for Temenos
Analysts made no major changes to their price target of US$136, suggesting the downgrades are not expected to have a long-term impact on Temenos'valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Temenos at US$238 per share, while the most bearish prices it at US$59.08. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with the forecast 0.8% revenue decline a notable change from historical growth of 14% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 7.5% next year. It's pretty clear that Temenos' 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. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Temenos after the downgrade.
A high debt burden combined with a downgrade of this magnitude always gives us some reason for concern, especially if these forecasts are just the first sign of a business downturn. See why we're concerned about Temenos' balance sheet by visiting our risks dashboard for free on our platform here.
You can also see our analysis of Temenos' Board and CEO remuneration and experience, and whether company insiders have been buying stock.
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