Need To Know: Analysts Just Made A Substantial Cut To Their Trainline Plc Estimates

Trainline 03 May, 2020
Need To Know: Analysts Just Made A Substantial Cut To Their Trainline Plc  Estimates
The latest analyst coverage could presage a bad day for Trainline Plc (LON:TRN), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon. Following the latest downgrade, the five analysts covering Trainline provided consensus estimates of UK£138m revenue in 2021, which would reflect a substantial 47% decline on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 52% to UK£0.085. However, before this estimates update, the consensus had been expecting revenues of UK£240m and UK£0.014 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase. Check out our latest analysis for Trainline The consensus price target was broadly unchanged at UK£4.11, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Trainline, with the most bullish analyst valuing it at UK£5.17 and the most bearish at UK£3.20 per share. 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. One way to get more context on these forecasts is to look at how they compare to both past performances, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast revenue decline of 47%, a significant reduction from annual growth of 17% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 13% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Trainline is expected to lag the wider industry. The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Trainline. Unfortunately, analysts also downgraded their revenue estimates, and industry data suggests that Trainline's revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Trainline. Even so, the longer-term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Trainline analysts - going out to 2023, 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.