One thing we could say about the analysts on Piper Sandler Companies (NYSE:PIPR) - 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) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Surprisingly the share price has been buoyant, rising 14% to US$54.95 in the past 7 days. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.
Following the downgrade, the most recent consensus for Piper Sandler Companies from its dual analysts is for revenues of US$893m in 2020 which, if met, would be a modest 7.0% increase on its sales over the past 12 months. After this downgrade, the company is anticipated to report a loss of US$1.94 in 2020, a sharp decline from a profit over the last year. Before this latest update, the analysts had been forecasting revenues of US$1.1b and earnings per share (EPS) of US$3.62 in 2020. So we can see that the consensus has become notably more bearish on Piper Sandler Companies' outlook with these numbers, making a sizeable cut to this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.
The consensus price target fell 28% to US$65.00, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Piper Sandler Companies, with the most bullish analyst valuing it at US$70.00 and the most bearish at US$60.00 per share. Even so, with a relatively close grouping of analyst estimates, it looks to us as though the analysts are quite confident in their valuations, suggesting that Piper Sandler Companies is an easy business to forecast or that the underlying assumptions are knowable.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Piper Sandler Companies'growth to accelerate, with the forecast 7.0% growth ranking favourably alongside historical growth of 5.6% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 2.2% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Piper Sandler Companies to grow faster than the wider industry.
The Bottom Line
The biggest low-light for us was that the forecasts for Piper Sandler Companies dropped from profits to a loss this year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Piper Sandler Companies.
After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Piper Sandler Companies' business, like dilutive stock issuance over the past year. Learn more, and discover the 3 other warning signs we've identified, for 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.
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