One thing we could say about the covering analyst on SJR in Scandinavia AB (publ) (STO:SJR B) – they aren’t optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analyst has soured majorly on the business. At kr17.80, shares are up 5.8% in the past 7 days. Investors could be forgiven for changing their mind on the business following the downgrade; but it’s not clear if the revised forecasts will lead to selling activity.
Following the downgrade, the consensus from sole analyst covering SJR in Scandinavia is for revenues of kr340m in 2020, implying a definite 18% decline in sales compared to the last 12 months. Statutory earnings per share are anticipated to crater 74% to kr0.45 in the same period. Before this latest update, the analyst had been forecasting revenues of kr431m and earnings per share (EPS) of kr2.64 in 2020. It looks like analyst sentiment has declined substantially, with a pretty serious reduction to revenue estimates and a pretty serious decline to earnings per share numbers as well.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast revenue decline of 18%, a significant reduction from annual growth of 6.6% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 2.9% next year. It’s pretty clear that SJR in Scandinavia’s revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest issue in the new estimates is that the analyst has reduced their earnings per share estimates, suggesting business headwinds lay ahead for SJR in Scandinavia. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After a cut like that, investors could be forgiven for thinking the analyst is a lot more bearish on SJR in Scandinavia, and a few readers might choose to steer clear of the stock.
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.
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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