Yahoo Finance Some Graham Corporation (NYSE:GHM) Analysts Just Made A Major Cut To Next Year's Estimates
Today is shaping up negative for Graham Corporation (NYSE:GHM) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the consensus from three analysts covering Graham is for revenues of US$81m in 2021, implying a not inconsiderable 12% decline in sales compared to the last 12 months. The losses are expected to disappear over the next year or so, with forecasts for a profit of US$0.093 per share next year. Before this latest update, the analysts had been forecasting revenues of US$109m and earnings per share (EPS) of US$0.82 in 2021. Indeed, we can see that the analysts are a lot more bearish about Graham's prospects, administering a pretty serious reduction to revenue estimates and slashing their EPS estimates to boot.
View our latest analysis for Graham
The consensus price target fell 24% to US$19.33, with the weaker earnings outlook clearly leading analyst valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Graham analyst has a price target of US$27.00 per share, while the most pessimistic values it at US$14.00. 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.
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. Over the past five years, revenues have declined around 8.3% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 12% decline in revenue next year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 1.1% per year. So while a broad number of companies are forecast to decline, unfortunately Graham is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Graham. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Graham's business, like the risk of cutting its dividend. Learn more, and discover the 1 other flag we've identified, for 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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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