The latest analyst coverage could presage a bad day for ABO Wind AG (HMSE:AB9), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the current consensus from ABO Wind's twin analysts is for revenues of €169m in 2021 which - if met - would reflect a notable 13% increase on its sales over the past 12 months. Per-share earnings are expected to swell 14% to €1.62. Previously, the analysts had been modelling revenues of €191m and earnings per share (EPS) of €1.97 in 2021. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a real cut to earnings per share numbers as well.
What's most unexpected is that the consensus price target rose 8.8% to €49.35, strongly implying the downgrade to forecasts is not expected to be more than a temporary blip. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on ABO Wind, with the most bullish analyst valuing it at €63.00 and the most bearish at €35.70 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting ABO Wind's growth to accelerate, with the forecast 13% annualised growth to the end of 2021 ranking favourably alongside historical growth of 5.8% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 6.2% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect ABO Wind to grow faster than the wider industry.
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, although our data indicates revenues are expected to perform better than the wider market. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.
A high debt burden combined with a downgrade of this magnitude always gives us some reason for concern, especially if these forecasts are just the first sign of a business downturn. See why we're concerned about ABO Wind's balance sheet by visiting our risks dashboard for free on our platform here.
If you’re looking to trade ABO Wind, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted
This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.