Market forces rained on the parade of CleanSpace Holdings Limited (ASX:CSX) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

After the downgrade, the twin analysts covering CleanSpace Holdings are now predicting revenues of AU$62m in 2021. If met, this would reflect a modest 2.2% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to dive 23% to AU$0.20 in the same period. Before this latest update, the analysts had been forecasting revenues of AU$72m and earnings per share (EPS) of AU$0.25 in 2021. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a real cut to earnings per share numbers as well.

See our latest analysis for CleanSpace Holdings  earnings-and-revenue-growth

The consensus price target fell 5.3% to AU$6.75, with the weaker earnings outlook clearly leading analyst valuation estimates. 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 CleanSpace Holdings analyst has a price target of AU$7.50 per share, while the most pessimistic values it at AU$6.75. This is a very narrow spread of estimates, implying either that CleanSpace Holdings is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

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 highlight that CleanSpace Holdings' revenue growth is expected to slow, with the forecast 4.4% annualised growth rate until the end of 2021 being well below the historical 207% growth over the last year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 15% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than CleanSpace Holdings.



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 CleanSpace Holdings. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that CleanSpace Holdings' revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of CleanSpace Holdings.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have analyst estimates for CleanSpace Holdings going out as far as 2025, and you can see them free on our platform here.

Of course, seeing company management  invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks 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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