Market forces rained on the parade of Dart Group PLC (LON:DTG) shareholders today, when the analysts downgraded their forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
Following the latest downgrade, the current consensus, from the four analysts covering Dart Group, is for revenues of UK£1.8b in 2021, which would reflect a substantial 47% reduction in Dart Group's sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of UK£2.7b in 2021. It looks like forecasts have become a fair bit less optimistic on Dart Group, given the sizeable cut to revenue estimates.
Notably, the analysts have cut their price target 5.9% to UK£10.13, suggesting concerns around Dart Group's 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. There are some variant perceptions on Dart Group, with the most bullish analyst valuing it at UK£10.50 and the most bearish at UK£10.00 per share. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 47%, a significant reduction from annual growth of 23% 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 14% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Dart Group is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for this year. They also expect company revenue to perform worse than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Given the stark change in sentiment, we'd understand if investors became more cautious on Dart Group after today.
That said, the analysts might have good reason to be negative on Dart Group, given a weak balance sheet. For more information, you can click here to discover this and the 4 other warning signs we've identified.
We also provide an overview of the Dart Group Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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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