Today is shaping up negative for Saber Insurance Group plc (LON:SBRE) shareholders, with the analysts delivering a substantial negative revision to this year’s forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing gray clouds on the horizon. Surprisingly the share price has been buoyant, rising 10% to UK£1.20 in the past 7 days. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.
Following the downgrade, the current consensus from Saber Insurance Group’s seven analysts is for revenues of UK£193m in 2022 which – if met – would reflect a sizeable 23% increase on its sales over the past 12 months. Statutory earnings per share are supposed to sink 20% to UK£0.05 in the same period. Prior to this update, the analysts had been forecasting revenues of UK£217m and earnings per share (EPS) of UK£0.064 in 2022. Indeed, we can see that the analysts are a lot more bearish about Saber Insurance Group’s prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
View our latest analysis for Saber Insurance Group
The consensus price target fell 13% to UK£1.68, 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 Saber Insurance Group analyst has a price target of UK£2.36 per share, while the most pessimistic values it at UK£1.20. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. For example, we noticed that Saber Insurance Group’s rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 51% growth to the end of 2022 on an annualized basis. That is well above its historical decline of 5.3% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 11% annually. Not only are Saber Insurance Group’s revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.
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 Saber Insurance Group. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better 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 Saber Insurance Group.
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 Saber Insurance Group’s business, like its declining profit margins. Learn more, and discover the 2 other concerns we’ve identified, for 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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take into account 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.