Endava Stock in Freefall After Disappointing Results

Endava's stock experienced a significant downturn last week, declining by 20% after the company released its latest annual results. The closing price yesterday was $26.62. The earnings per share for common stock fell significantly short of expectations, at £0.29—32% lower than analysts had forecasted. Revenues were £741 million, aligning with estimates. Analysts subsequently revised their profit models to assess whether the company's outlook has fundamentally changed or if the trends will continue as before. Following the latest results, the twelve analysts covering Endava project revenues of £804.6 million for 2025, representing notable growth of 8.6% compared to the previous year. Common stock earnings per share are expected to rise by 33% to £0.38. However, prior to this report, analysts had predicted revenues of £820.9 million and earnings per share of £0.60 for 2025. The newest results appear to have made analysts more pessimistic, with no changes in revenue forecasts but significant reductions in earnings forecasts. The average price target dropped by 11% to $40.57, clearly reflecting the reduced earnings forecasts. It should be noted that there is considerable variance among the price targets. While the most optimistic analyst values Endava at $64.87 per share, the most pessimistic values it at $30.10. This highlights the disagreement among analysts regarding the company's future performance. In a broader context, analysts expect Endava's revenue growth to slow down: with a projected annual growth rate of 8.6% until the end of 2025, this is well below the historical growth rate of 22% per year over the past five years. Other companies in the industry, as covered by analysts, are expected to grow by an average of 8.9% annually. Thus, while Endava's growth is slowing, it remains roughly in line with the industry. ### Conclusion The primary concern among analysts is the reduction in earnings forecasts, indicating potential upcoming business challenges. Positively, there have been no significant changes to revenue forecasts, and the company is still expected to grow in line with the industry. Additionally, analysts have cut their price targets, reflecting increased skepticism about the company's intrinsic value. In the long run, profit forecasts are more important for the company than the coming year. Estimates for 2027 from multiple analysts can be accessed through our platform. However, risks should always be considered, such as the two identified warning signals for Endava.