Downgrade: Here's How Analysts See Dolphin Drilling AS (OB:DDRIL) Performing In The Near Term

One thing we could say about the analysts on Dolphin Drilling AS (OB:DDRIL) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. At kr7.05, shares are up 5.4% in the past 7 days. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

Following the downgrade, the current consensus from Dolphin Drilling's four analysts is for revenues of US$122m in 2024 which - if met - would reflect a substantial 483% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 97% to US$0.0098. Prior to this update, the analysts had been forecasting revenues of US$145m and earnings per share (EPS) of US$0.058 in 2024. There looks to have been a major change in sentiment regarding Dolphin Drilling's prospects, with a measurable cut to revenues and the analysts now forecasting a loss instead of a profit.

View our latest analysis for Dolphin Drilling

The consensus price target fell 22% to US$1.03, implicitly signalling that lower earnings per share are a leading indicator for Dolphin Drilling'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 Dolphin Drilling analyst has a price target of US$1.17 per share, while the most pessimistic values it at US$0.85. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Dolphin Drilling shareholders.

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. For example, we noticed that Dolphin Drilling's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 3x growth to the end of 2024 on an annualised basis. That is well above its historical decline of 83% a year over the past year. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 8.1% annually. Not only are Dolphin Drilling's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts are expecting Dolphin Drilling to become unprofitable next year. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Dolphin Drilling.

There might be good reason for analyst bearishness towards Dolphin Drilling, 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 flag we've identified.

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.