The Ted Baker Plc (LON:TED) Analysts Have Been Trimming Their Sales Forecasts
The latest analyst coverage could presage a bad day for Ted Baker Plc (LON:TED), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
After the downgrade, the consensus from Ted Baker's seven analysts is for revenues of UK£389m in 2021, which would reflect a substantial 37% decline in sales compared to the last year of performance. Per-share earnings are expected to leap 747% to UK£0.22. Previously, the analysts had been modelling revenues of UK£447m and earnings per share (EPS) of UK£0.26 in 2021. Indeed, we can see that the analysts are a lot more bearish about Ted Baker's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
See our latest analysis for Ted Baker
The consensus price target fell 23% to UK£2.28, with the weaker earnings outlook clearly leading analyst valuation estimates. 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 Ted Baker, with the most bullish analyst valuing it at UK£3.60 and the most bearish at UK£1.30 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
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. We would highlight that sales are expected to reverse, with the forecast 37% revenue decline a notable change from historical growth of 11% 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 5.7% annually for the foreseeable future. It's pretty clear that Ted Baker's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Ted Baker's revenues are expected to grow slower 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. 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 Ted Baker after today.
So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Ted Baker, including its declining profit margins. Learn more, and discover the 5 other flags we've identified, for free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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