Advertisement
New Zealand markets closed
  • NZX 50

    12,105.29
    +94.63 (+0.79%)
     
  • NZD/USD

    0.5976
    -0.0030 (-0.50%)
     
  • NZD/EUR

    0.5535
    -0.0008 (-0.14%)
     
  • ALL ORDS

    8,153.70
    +80.10 (+0.99%)
     
  • ASX 200

    7,896.90
    +77.30 (+0.99%)
     
  • OIL

    83.11
    +1.76 (+2.16%)
     
  • GOLD

    2,240.40
    +27.70 (+1.25%)
     
  • NASDAQ

    18,243.83
    -37.01 (-0.20%)
     
  • FTSE

    7,952.62
    +20.64 (+0.26%)
     
  • Dow Jones

    39,772.53
    +12.45 (+0.03%)
     
  • DAX

    18,492.49
    +15.40 (+0.08%)
     
  • Hang Seng

    16,541.42
    +148.58 (+0.91%)
     
  • NIKKEI 225

    40,168.07
    -594.66 (-1.46%)
     
  • NZD/JPY

    90.4050
    -0.3750 (-0.41%)
     

Downgrade: Here's How This Analyst Sees AVJennings Limited (ASX:AVJ) Performing In The Near Term

One thing we could say about the covering analyst on AVJennings Limited (ASX:AVJ) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analyst seeing grey clouds on the horizon.

Following the latest downgrade, the current consensus, from the one analyst covering AVJennings, is for revenues of AU$290m in 2020, which would reflect an uncomfortable 18% reduction in AVJennings' sales over the past 12 months. Statutory earnings per share are supposed to crater 52% to AU$0.028 in the same period. Before this latest update, the analyst had been forecasting revenues of AU$355m and earnings per share (EPS) of AU$0.053 in 2020. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.

See our latest analysis for AVJennings

ASX:AVJ Past and Future Earnings May 27th 2020
ASX:AVJ Past and Future Earnings May 27th 2020

It'll come as no surprise then, to learn that the analyst has cut their price target 35% to AU$0.42.

ADVERTISEMENT

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. Over the past five years, revenues have declined around 0.4% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 18% decline in revenue next year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 3.7% per year. So it's pretty clear that, while it does have declining revenues, the analyst also expect AVJennings to suffer worse than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that the analyst has reduced their earnings per share estimates, suggesting business headwinds lay ahead for AVJennings. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that AVJennings' 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 AVJennings.

Unfortunately, the earnings downgrade - if accurate - may also place pressure on AVJennings' mountain of debt, which could lead to some belt tightening for shareholders. To see more of our financial analysis, you can click through to our free platform to learn more about its balance sheet and specific concerns we've identified.

You can also see our analysis of AVJennings' Board and CEO remuneration and experience, and whether company insiders have been buying stock.

Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email 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. 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. Thank you for reading.