Downgrade: What You Need To Know About The Latest Melhus Sparebank (OB:MELG) Forecasts

The latest analyst coverage could presage a bad day for Melhus Sparebank (OB:MELG), with the covering analyst making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue estimates were cut sharply as the analyst signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following the downgrade, the consensus from solo analyst covering Melhus Sparebank is for revenues of kr189m in 2022, implying a stressful 22% decline in sales compared to the last 12 months. Statutory earnings per share are expected to be kr13.40, roughly flat on the last 12 months. Before this latest update, the analyst had been forecasting revenues of kr235m and earnings per share (EPS) of kr13.51 in 2022. Indeed we can see that the consensus opinion has undergone some fundamental changes following the recent consensus updates, with a measurable cut to revenues and some minor tweaks to earnings numbers.

Check out the opportunities and risks within the XX Mortgage industry.

The consensus price target was reduced 8.1% to kr158, with the lower revenue forecasts indicating negative sentiment towards Melhus Sparebank, even though earnings forecasts were unchanged.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One more thing stood out to us about these estimates, and it's the idea that Melhus Sparebank's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 40% to the end of 2022. This tops off a historical decline of 1.5% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 6.6% per year. So it's pretty clear that, while it does have declining revenues, the analyst also expect Melhus Sparebank to suffer worse than the wider industry.

The Bottom Line

The most obvious conclusion from this consensus update is that there's been no major change in the business' prospects in recent times, with the analyst holding earnings per share steady, in line with previous estimates. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The consensus price target fell measurably, with the analyst seemingly not reassured by recent business developments, leading to a lower estimate of Melhus Sparebank's future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on Melhus Sparebank after today.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for Melhus Sparebank going out as far as 2024, and you can see them 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.