News Flash: 4 Analysts Think Workspace Group plc (LON:WKP) Earnings Are Under Threat
One thing we could say about the analysts on Workspace Group plc (LON:WKP) - 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 analysts seeing grey clouds on the horizon.
Following the latest downgrade, the four analysts covering Workspace Group provided consensus estimates of UK£128m revenue in 2021, which would reflect a stressful 21% decline on its sales over the past 12 months. After this downgrade, the company is anticipated to report a loss of UK£2.21 in 2021, a sharp decline from a profit over the last year. However, before this estimates update, the consensus had been expecting revenues of UK£150m and UK£1.99 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
See our latest analysis for Workspace Group
There was no major change to the consensus price target of UK£7.25, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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 Workspace Group analyst has a price target of UK£8.80 per share, while the most pessimistic values it at UK£5.90. 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 Workspace Group shareholders.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 21%, a significant reduction from annual growth of 12% 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 6.3% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Workspace Group is expected to lag the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Workspace Group. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Workspace Group after the downgrade.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Workspace Group analysts - going out to 2022, 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.
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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