Analysts' Revenue Estimates For DNO ASA (OB:DNO) Are Surging Higher

By
Simply Wall St
Published
March 19, 2022
OB:DNO
Source: Shutterstock

Shareholders in DNO ASA (OB:DNO) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The revenue forecast for this year has experienced a facelift, with analysts now much more optimistic on its sales pipeline.

After the upgrade, the three analysts covering DNO are now predicting revenues of US$1.1b in 2022. If met, this would reflect a decent 14% improvement in sales compared to the last 12 months. Per-share earnings are expected to bounce 76% to US$0.37. Before this latest update, the analysts had been forecasting revenues of US$1.0b and earnings per share (EPS) of US$0.35 in 2022. The most recent forecasts are noticeably more optimistic, with a nice gain to revenue estimates and a lift to earnings per share as well.

Check out our latest analysis for DNO

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OB:DNO Earnings and Revenue Growth March 19th 2022

It will come as no surprise to learn that the analysts have increased their price target for DNO 7.5% to kr14.25 on the back of these upgrades. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic DNO analyst has a price target of kr18.00 per share, while the most pessimistic values it at kr7.50. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the DNO's past performance and to peers in the same industry. It's pretty clear that there is an expectation that DNO's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 14% growth on an annualised basis. This is compared to a historical growth rate of 20% 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 shrink 1.8% per year. Factoring in the forecast slowdown in growth, it's pretty clear that DNO is still expected to grow faster than the wider industry.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Fortunately, they also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at DNO.

Using these estimates as a starting point, we've run a discounted cash flow calculation (DCF) on DNO that suggests the company could be somewhat undervalued. For more information, you can click through to our platform to learn more about our valuation approach.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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