Yahoo Finance Time To Worry? Analysts Are Downgrading Their Gentex Corporation (NASDAQ:GNTX) Outlook
The latest analyst coverage could presage a bad day for Gentex Corporation (NASDAQ:GNTX), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. 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 latest downgrade, the nine analysts covering Gentex provided consensus estimates of US$1.6b revenue in 2020, which would reflect a definite 14% decline on its sales over the past 12 months. Statutory earnings per share are supposed to crater 20% to US$1.33 in the same period. Before this latest update, the analysts had been forecasting revenues of US$1.8b and earnings per share (EPS) of US$1.61 in 2020. Indeed, we can see that the analysts are a lot more bearish about Gentex's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
Check out our latest analysis for Gentex
Despite the cuts to forecast earnings, there was no real change to the US$25.00 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Gentex, with the most bullish analyst valuing it at US$35.00 and the most bearish at US$13.00 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 14%, a significant reduction from annual growth of 5.9% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 3.6% annually for the foreseeable future. It's pretty clear that Gentex's revenues are expected to perform substantially worse than the wider 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 Gentex. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Gentex's revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Gentex.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Gentex analysts - going out to 2022, and you can see them 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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