The analyst covering McKay Securities Plc (LON:MCKS) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue estimates were cut sharply as the analyst signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following the downgrade, the consensus from solitary analyst covering McKay Securities is for revenues of UK£19m in 2021, implying a disturbing 34% decline in sales compared to the last 12 months. Prior to the latest estimates, the analyst was forecasting revenues of UK£23m in 2021. It looks like forecasts have become a fair bit less optimistic on McKay Securities, given the measurable cut to revenue estimates.

Check out our latest analysis for McKay Securities

The consensus price target fell 9.4% to UK£2.40, with the analyst clearly less optimistic about McKay Securities' valuation following this update. 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. The most optimistic McKay Securities analyst has a price target of UK£2.50 per share, while the most pessimistic values it at UK£2.30. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analyst has a clear view on its prospects.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 34% revenue decline a notable change from historical growth of 4.8% 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 5.5% annually for the foreseeable future. It's pretty clear that McKay Securities' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that the analyst cut their revenue estimates for this year. They're also anticipating slower revenue growth than the wider market. The consensus price target fell measurably, with the analyst seemingly not reassured by recent business developments, leading to a lower estimate of McKay Securities' future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on McKay Securities after today.

That said, the covering analyst might have good reason to be negative on McKay Securities, given its declining profit margins. Learn more, and discover the 2 other concerns 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.

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. 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.

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