Earnings Update: Here's Why Analysts Just Lifted Their Tomra Systems ASA (OB:TOM) Price Target To kr117

Tomra Systems ASA (OB:TOM) shareholders are probably feeling a little disappointed, since its shares fell 7.7% to kr138 in the week after its latest first-quarter results. It was an okay result overall, with revenues coming in at kr3.3b, roughly what the analysts had been expecting. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Tomra Systems

Following last week's earnings report, Tomra Systems' five analysts are forecasting 2024 revenues to be kr15.0b, approximately in line with the last 12 months. Per-share earnings are expected to soar 75% to kr3.48. Yet prior to the latest earnings, the analysts had been anticipated revenues of kr15.1b and earnings per share (EPS) of kr4.08 in 2024. So there's definitely been a decline in sentiment after the latest results, noting the substantial drop in new EPS forecasts.

Althoughthe analysts have revised their earnings forecasts for next year, they've also lifted the consensus price target 13% to kr117, suggesting the revised estimates are not indicative of a weaker long-term future for the business. 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. Currently, the most bullish analyst values Tomra Systems at kr130 per share, while the most bearish prices it at kr95.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

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. It's pretty clear that there is an expectation that Tomra Systems' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 1.5% growth on an annualised basis. This is compared to a historical growth rate of 11% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 11% per year. Factoring in the forecast slowdown in growth, it seems obvious that Tomra Systems is also expected to grow slower than other industry participants.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Tomra Systems. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Tomra Systems' revenue is expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

With that in mind, we wouldn't be too quick to come to a conclusion on Tomra Systems. Long-term earnings power is much more important than next year's profits. We have forecasts for Tomra Systems going out to 2026, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Tomra Systems (at least 1 which makes us a bit uncomfortable) , and understanding these should be part of your investment process.

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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.