One thing we could say about the analysts on Digital Garage, Inc. (TSE:4819) – they aren’t optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
After the downgrade, the three analysts covering Digital Garage are now predicting revenues of JP¥40b in 2027. If met, this would reflect a decent 15% improvement in sales compared to the last 12 months. Losses are expected to turn into profits real soon, with the analysts forecasting JP¥113 in per-share earnings. Previously, the analysts had been modelling revenues of JP¥45b and earnings per share (EPS) of JP¥132 in 2027. Indeed, we can see that the analysts are a lot more bearish about Digital Garage’s prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
See our latest analysis for Digital Garage
The consensus price target fell 5.5% to JP¥3,190, with the weaker earnings outlook clearly leading analyst valuation estimates.
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 Digital Garage’s rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 31% growth to the end of 2027 on an annualised basis. That is well above its historical decline of 6.8% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 6.5% per year. Not only are Digital Garage’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 Digital Garage. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better 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. Overall, given the drastic downgrade to this year’s forecasts, we’d be feeling a little more wary of Digital Garage going forwards.
Worse yet, our risk analysis suggests that Digital Garage may find it hard to maintain its dividend following these downgrades. You can learn more, and discover the 1 possible risk we’ve identified, for 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 backed by insiders.
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