Bearish: Analysts Just Cut Their Dolphin Drilling AS (OB:DDRIL) Revenue and EPS estimates

The latest analyst coverage could presage a bad day for Dolphin Drilling AS (OB:DDRIL), 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) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following the downgrade, the latest consensus from Dolphin Drilling's four analysts is for revenues of US$68m in 2023, which would reflect a huge 222% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 59% to US$0.13. Yet before this consensus update, the analysts had been forecasting revenues of US$102m and losses of US$0.11 per share in 2023. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

See our latest analysis for Dolphin Drilling

The consensus price target fell 28% to US$1.47, implicitly signalling that lower earnings per share are a leading indicator for Dolphin Drilling's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Dolphin Drilling at US$1.69 per share, while the most bearish prices it at US$1.22. 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Dolphin Drilling's past performance and to peers in the same industry. One thing stands out from these estimates, which is that Dolphin Drilling is forecast to grow faster in the future than it has in the past, with revenues expected to display 4x annualised growth until the end of 2023. If achieved, this would be a much better result than the 23% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 10% per year. So it looks like Dolphin Drilling is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Dolphin Drilling. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Dolphin Drilling.

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 Dolphin Drilling'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 1 other concern 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.