Orascom Development Holding AG (VTX:ODHN) Analysts Are Reducing Their Forecasts For This Year

The analysts covering Orascom Development Holding AG (VTX:ODHN) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon. Shares are up 8.3% to CHF7.58 in the past week. 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 latest downgrade, Orascom Development Holding's two analysts currently expect revenues in 2022 to be CHF588m, approximately in line with the last 12 months. Statutory earnings per share are presumed to jump 159% to CHF0.69. Previously, the analysts had been modelling revenues of CHF659m and earnings per share (EPS) of CHF0.79 in 2022. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a real cut to earnings per share numbers as well.

Our analysis indicates that ODHN is potentially overvalued!

The consensus price target fell 24% to CHF7.20, with the weaker earnings outlook clearly leading analyst valuation estimates.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Orascom Development Holding's revenue growth is expected to slow, with the forecast 1.8% annualised growth rate until the end of 2022 being well below the historical 16% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 11% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Orascom Development Holding.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Orascom Development Holding's revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Orascom Development Holding.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have analyst estimates for Orascom Development Holding going out as far as 2024, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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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.