Today is shaping up negative for Terra Firma Capital Corporation (CVE:TII) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
Following the downgrade, the latest consensus from Terra Firma Capital's twin analysts is for revenues of US$9.6m in 2020, which would reflect a huge 28% improvement in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing US$14m of revenue in 2020. The consensus view seems to have become more pessimistic on Terra Firma Capital, noting the sizeable cut to revenue estimates in this update.
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. One thing stands out from these estimates, which is that Terra Firma Capital is forecast to grow faster in the future than it has in the past, with revenues expected to grow 28%. If achieved, this would be a much better result than the 10% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 2.6% per year. Not only are Terra Firma Capital's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for this year. They're also forecasting more rapid revenue growth than the wider market. 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 Terra Firma Capital after today.
There might be good reason for analyst bearishness towards Terra Firma Capital, like its declining profit margins. For more information, you can click here to discover this and the 4 other concerns we've identified.
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.
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