One Analyst Thinks Melhus Sparebank's (OB:MELG) Revenues Are Under Threat

Market forces rained on the parade of Melhus Sparebank (OB:MELG) shareholders today, when the covering analyst downgraded their forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

After the downgrade, the consensus from Melhus Sparebank's sole analyst is for revenues of kr179m in 2022, which would reflect a disturbing 26% decline in sales compared to the last year of performance. Statutory earnings per share are expected to be kr13.65, roughly flat on the last 12 months. Prior to this update, the analyst had been forecasting revenues of kr231m and earnings per share (EPS) of kr13.52 in 2022. Indeed we can see that the consensus opinion has undergone some fundamental changes following the recent consensus updates, with a pretty serious reduction to revenues and some minor tweaks to earnings numbers.

See our latest analysis for Melhus Sparebank

The average price target was steady at kr172 even though revenue estimates declined; likely suggesting the analyst place a higher value on earnings.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. 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 34% to the end of 2022. This tops off a historical decline of 4.2% 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 8.8% 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 important thing to take away is that there's been no major change in sentiment, with the analyst reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Melhus Sparebank going forwards.

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.

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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.