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The analysts covering 3i Group plc (LON:III) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
Following the downgrade, the most recent consensus for 3i Group from its six analysts is for revenues of UK£3.5b in 2022 which, if met, would be a decent 19% increase on its sales over the past 12 months. Statutory earnings per share are presumed to swell 14% to UK£3.30. Before this latest update, the analysts had been forecasting revenues of UK£4.0b and earnings per share (EPS) of UK£3.45 in 2022. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a substantial drop in revenue estimates and a small dip in EPS estimates to boot.
View our latest analysis for 3i Group
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting 3i Group's growth to accelerate, with the forecast 43% annualised growth to the end of 2022 ranking favourably alongside historical growth of 2.7% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 1.4% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that 3i Group is expected to grow much faster than its industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for 3i Group. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of 3i Group going forwards.
As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with 3i Group's financials, such as concerns around earnings quality. For more information, you can click here to discover this and the 1 other warning sign we've identified.
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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.