Market forces rained on the parade of AKITA Drilling Ltd. (TSE:AKT.A) shareholders today, when the covering analyst downgraded their forecasts for this year. Revenue estimates were cut sharply as the analyst signalled a weaker outlook – perhaps a sign that investors should temper their expectations as well.
Following the latest downgrade, the current consensus, from the one analyst covering AKITA Drilling, is for revenues of CA$122m in 2020, which would reflect a concerning 31% reduction in AKITA Drilling’s sales over the past 12 months. Prior to the latest estimates, the analyst was forecasting revenues of CA$166m in 2020. The consensus view seems to have become more pessimistic on AKITA Drilling, noting the sizeable cut to revenue estimates in this update.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with the forecast 31% revenue decline a notable change from historical growth of 2.1% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue decline 11% annually for the foreseeable future. So it’s pretty clear that AKITA Drilling’s revenues are expected to shrink faster than the wider industry.
The Bottom Line
The clear low-light was that the analyst slashing their revenue forecasts for AKITA Drilling this year. The analyst also expects revenues to shrink faster than the wider market. After a cut like that, investors could be forgiven for thinking the analyst is a lot more bearish on AKITA Drilling, and a few readers might choose to steer clear of the stock.
There might be good reason for analyst bearishness towards AKITA Drilling, like major dilution from new stock issuance in the past year. Learn more, and discover the 2 other concerns we’ve identified, for free on our platform here.
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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