SRV Yhtiöt Oyj (HEL:SRV1V) Analysts Just Slashed Next Year's Revenue Estimates By 12%

Market forces rained on the parade of SRV Yhtiöt Oyj (HEL:SRV1V) shareholders today, when the analysts downgraded their forecasts for next year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. The stock price has risen 9.7% to €3.96 over 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 downgrade, the consensus from two analysts covering SRV Yhtiöt Oyj is for revenues of €747m in 2023, implying a not inconsiderable 19% decline in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of €852m in 2023. It looks like forecasts have become a fair bit less optimistic on SRV Yhtiöt Oyj, given the measurable cut to revenue estimates.

Check out our latest analysis for SRV Yhtiöt Oyj

Notably, the analysts have cut their price target 14% to €4.45, suggesting concerns around SRV Yhtiöt Oyj's valuation. 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 SRV Yhtiöt Oyj analyst has a price target of €4.60 per share, while the most pessimistic values it at €4.30. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.

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. Over the past five years, revenues have declined around 3.3% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 16% decline in revenue until the end of 2023. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 3.1% per year. So while a broad number of companies are forecast to grow, unfortunately SRV Yhtiöt Oyj is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for next year. They also expect company revenue to perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of SRV Yhtiöt Oyj's future valuation. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on SRV Yhtiöt Oyj after today.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with SRV Yhtiöt Oyj's business, like major dilution from new stock issuance in the past year. For more information, you can click here to discover this and the 2 other risks we've identified.

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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.