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One Analyst Thinks Nexus Real Estate Investment Trust's (CVE:NXR.UN) Revenues Are Under Threat

Simply Wall St

Market forces rained on the parade of Nexus Real Estate Investment Trust (CVE:NXR.UN) shareholders today, when the covering analyst downgraded their forecasts for this year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. At CA$1.51, shares are up 6.3% in the past 7 days. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

Following the latest downgrade, the one analyst covering Nexus Real Estate Investment Trust provided consensus estimates of CA$39m revenue in 2020, which would reflect a disturbing 38% decline on its sales over the past 12 months. Before the latest update, the analyst was foreseeing CA$45m of revenue in 2020. The consensus view seems to have become more pessimistic on Nexus Real Estate Investment Trust, noting the measurable cut to revenue estimates in this update.

Check out our latest analysis for Nexus Real Estate Investment Trust

TSXV:NXR.UN Past and Future Earnings May 23rd 2020

The consensus price target fell 18% to CA$1.97, with the analyst clearly less optimistic about Nexus Real Estate Investment Trust's valuation following this update. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Nexus Real Estate Investment Trust at CA$2.10 per share, while the most bearish prices it at CA$1.80. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Nexus Real Estate Investment Trust's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 38% revenue decline a notable change from historical growth of 38% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 2.7% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Nexus Real Estate Investment Trust is expected to lag the wider industry.

The Bottom Line

The clear low-light was that the analyst slashing their revenue forecasts for Nexus Real Estate Investment Trust this year. They also expect company revenue to perform worse than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Given the stark change in sentiment, we'd understand if investors became more cautious on Nexus Real Estate Investment Trust after today.

As you can see, this broker clearly isn't bullish, and there might be good reason for that. We've identified some potential issues with Nexus Real Estate Investment Trust's financials, such as dilutive stock issuance over the past year. For more information, you can click here to discover this and the 4 other risks we've identified.

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. 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. Thank you for reading.