Analysts Just Slashed Their Synlait Milk Limited (NZSE:SML) EPS Numbers

One thing we could say about the analysts on Synlait Milk Limited (NZSE:SML) - 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. At NZ$5.17, shares are up 6.6% in the past 7 days. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

Following the latest downgrade, the seven analysts covering Synlait Milk provided consensus estimates of NZ$1.3b revenue in 2021, which would reflect a noticeable 3.8% decline on its sales over the past 12 months. Statutory earnings per share are supposed to plummet 52% to NZ$0.20 in the same period. Before this latest update, the analysts had been forecasting revenues of NZ$1.4b and earnings per share (EPS) of NZ$0.40 in 2021. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a pretty serious decline to earnings per share numbers as well.

Check out our latest analysis for Synlait Milk

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It'll come as no surprise then, to learn that the analysts have cut their price target 14% to NZ$5.66. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Synlait Milk analyst has a price target of NZ$7.02 per share, while the most pessimistic values it at NZ$4.60. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Synlait Milk shareholders.

Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast revenue decline of 3.8%, a significant reduction from annual growth of 20% 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 7.2% next year. It's pretty clear that Synlait Milk'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 Synlait Milk's revenues are expected to grow slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Synlait Milk.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Synlait Milk, including recent substantial insider selling. Learn more, and discover the 2 other concerns we've identified, for free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks 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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