Stock Analysis

Rainbows and Unicorns: Coreo AG (ETR:CORE) Analysts Just Became A Lot More Optimistic

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Coreo AG (ETR:CORE) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance.

Following the latest upgrade, the current consensus, from the twin analysts covering Coreo, is for revenues of €6.3m in 2022, which would reflect a substantial 59% reduction in Coreo's sales over the past 12 months. The losses are expected to disappear over the next year or so, with forecasts for a profit of €0.13 per share this year. Previously, the analysts had been modelling revenues of €5.4m and earnings per share (EPS) of €0.085 in 2022. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.

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XTRA:CORE Earnings and Revenue Growth October 28th 2022

As a result, it might be a surprise to see that the analysts have cut their price target 7.8% to €1.78, which could suggest the forecast improvement in performance is not expected to last. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Coreo analyst has a price target of €1.85 per share, while the most pessimistic values it at €1.70. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Coreo is an easy business to forecast or the underlying assumptions are obvious.

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 sales are expected to reverse, with a forecast 59% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 35% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 4.6% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Coreo is expected to lag the wider industry.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. A lower price target is not intuitively what we would expect from a company whose business prospects are improving - at least judging by these forecasts - but if the underlying fundamentals are strong, Coreo could be one for the watch list.

These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 3 potential flags with Coreo, including dilutive stock issuance over the past year. You can learn more, and discover the 2 other flags we've identified, for 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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