There's been a notable change in appetite for Stagwell Inc. (NASDAQ:STGW) shares in the week since its second-quarter report, with the stock down 11% to US$6.15. Revenues came in at US$671m, in line with estimates, while Stagwell reported a statutory loss of US$0.03 per share, well short of prior analyst forecasts for a profit. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

Following the latest results, Stagwell's seven analysts are now forecasting revenues of US$2.70b in 2024. This would be an okay 3.4% improvement in revenue compared to the last 12 months. Earnings are expected to improve, with Stagwell forecast to report a statutory profit of US$0.24 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$2.77b and earnings per share (EPS) of US$0.27 in 2024. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the minor downgrade to earnings per share expectations.

Despite the cuts to forecast earnings, there was no real change to the US$7.94 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Stagwell, with the most bullish analyst valuing it at US$10.00 and the most bearish at US$6.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Stagwell's past performance and to peers in the same industry. It's pretty clear that there is an expectation that Stagwell's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 6.9% growth on an annualised basis. This is compared to a historical growth rate of 24% over the past three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 3.2% annually. So it's pretty clear that, while Stagwell's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Stagwell. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Stagwell analysts - going out to 2026, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Stagwell , and understanding this should be part of your investment process.

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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 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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