The Consensus EPS Estimates For Signify N.V. (AMS:LIGHT) Just Fell Dramatically
One thing we could say about the analysts on Signify N.V. (AMS:LIGHT) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.
After the downgrade, the nine analysts covering Signify are now predicting revenues of €6.8b in 2020. If met, this would reflect a solid 8.7% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to dive 47% to €1.09 in the same period. Before this latest update, the analysts had been forecasting revenues of €7.6b and earnings per share (EPS) of €2.62 in 2020. Indeed, we can see that the analysts are a lot more bearish about Signify's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
See our latest analysis for Signify
The consensus price target fell 14% to €24.67, 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 Signify, with the most bullish analyst valuing it at €32.00 and the most bearish at €19.50 per share. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
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. One thing stands out from these estimates, which is that Signify is forecast to grow faster in the future than it has in the past, with revenues expected to grow 8.7%. If achieved, this would be a much better result than the 3.9% annual decline over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 5.7% next year. Not only are Signify'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 biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Signify. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Signify.
Unfortunately, the earnings downgrade - if accurate - may also place pressure on Signify'smountain of debt, which could lead to some belt tightening for shareholders. See why we're concerned about Signify's balance sheet by visiting our risks dashboard for free on our platform here.
We also provide an overview of the Signify Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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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