It’s been a sad week for Solteq Oyj (HEL:SOLTEQ), who’ve watched their investment drop 10% to €1.30 in the week since the company reported its annual result. Results overall were respectable, with statutory earnings of €0.15 per share roughly in line with what analysts had forecast. Revenues of €61m came in 4.4% ahead of analyst predictions. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
After the latest results, the consensus from Solteq Oyj’s sole analyst is for revenues of €57.5m in 2020, which would reflect a measurable 5.6% decline in sales compared to the last year of performance. Statutory earnings per share are expected to plunge 60% to €0.06 in the same period. Before this earnings report, analysts had been forecasting revenues of €61.5m and earnings per share (EPS) of €0.13 in 2020. From this we can that analyst sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a pretty serious reduction to earnings per share estimates.
Despite the cuts to forecast earnings, there was no real change to the €1.43 price target, showing that analysts don’t think the changes have a meaningful impact on the stock’s intrinsic value.
In addition, we can look to Solteq Oyj’s past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. We would highlight that sales are expected to reverse, with the forecast 5.6% revenue decline a notable change from historical growth of 4.1% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 13% annually for the foreseeable future. It’s pretty clear that Solteq Oyj’s revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Solteq Oyj. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at €1.43, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At least one analyst has provided forecasts out to 2022, which can be seen for free on our platform here.
It might also be worth considering whether Solteq Oyj’s debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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