The analysts covering Regional REIT Limited (LON:RGL) 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 analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
Following the latest downgrade, the three analysts covering Regional REIT provided consensus estimates of UK£72m revenue in 2022, which would reflect a not inconsiderable 19% decline on its sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of UK£91m in 2022. The consensus view seems to have become more pessimistic on Regional REIT, noting the sizeable cut to revenue estimates in this update.
Notably, the analysts have cut their price target 12% to UK£0.82, suggesting concerns around Regional REIT's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Regional REIT analyst has a price target of UK£0.90 per share, while the most pessimistic values it at UK£0.75. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Regional REIT's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 34% by the end of 2022. This indicates a significant reduction from annual growth of 6.7% 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 Regional REIT's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The clear low-light was that analysts slashing their revenue forecasts for Regional REIT this year. They're also anticipating slower revenue growth 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 Regional REIT after today.
Of course, there's always more to the story. We have estimates for Regional REIT from its three analysts out until 2024, 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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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