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The analysts covering Compass, Inc. (NYSE:COMP) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.
Following the latest downgrade, the six analysts covering Compass provided consensus estimates of US$6.6b revenue in 2022, which would reflect a perceptible 2.5% decline on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 21% to US$1.03. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$7.5b and losses of US$0.78 per share in 2022. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
View our latest analysis for Compass
The consensus price target fell 10% to US$6.06, implicitly signalling that lower earnings per share are a leading indicator for Compass' 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 Compass analyst has a price target of US$7.50 per share, while the most pessimistic values it at US$4.20. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 4.9% by the end of 2022. This indicates a significant reduction from annual growth of 23% over the last year. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 6.2% per year. It's pretty clear that Compass' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Compass' 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 Compass.