The analysts covering McPherson's Limited (ASX:MCP) 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) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following this downgrade, McPherson's' four analysts are forecasting 2021 revenues to be AU$220m, approximately in line with the last 12 months. Statutory earnings per share are presumed to surge 25% to AU$0.071. Prior to this update, the analysts had been forecasting revenues of AU$245m and earnings per share (EPS) of AU$0.14 in 2021. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.

See our latest analysis for McPherson's  earnings-and-revenue-growth

It'll come as no surprise then, to learn that the analysts have cut their price target 53% to AU$1.54. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values McPherson's at AU$1.79 per share, while the most bearish prices it at AU$1.30. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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. We would also point out that the forecast 1.1% revenue decline is better than the historical trend, which saw revenues shrink 11% annually over the past five years

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. 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 McPherson's.



With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple McPherson's analysts - going out to 2024, 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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