One thing we could say about the analysts on International Personal Finance plc (LON:IPF) – 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 the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the consensus from three analysts covering International Personal Finance is for revenues of UK£673m in 2020, implying a chunky 16% decline in sales compared to the last 12 months. Losses are supposed to balloon 244% to UK£0.35 per share. However, before this estimates update, the consensus had been expecting revenues of UK£782m and UK£0.31 per share in losses. 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.
The consensus price target fell 8.2% to UK£2.02, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. There are some variant perceptions on International Personal Finance, with the most bullish analyst valuing it at UK£2.47 and the most bearish at UK£1.65 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
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 revenue decline of 16%, a significant reduction from annual growth of 4.0% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 8.3% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining – International Personal Finance is expected to lag 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. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales 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 International Personal Finance.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have estimates – from multiple International Personal Finance 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.