Time To Worry? Analysts Are Downgrading Their OKEA ASA (OB:OKEA) Outlook

The analysts covering OKEA ASA (OB:OKEA) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the most recent consensus for OKEA from its dual analysts is for revenues of kr8.2b in 2023 which, if met, would be a major 28% increase on its sales over the past 12 months. Statutory earnings per share are presumed to leap 74% to kr11.20. Prior to this update, the analysts had been forecasting revenues of kr10b and earnings per share (EPS) of kr16.94 in 2023. Indeed, we can see that the analysts are a lot more bearish about OKEA's prospects, administering a sizeable cut to revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for OKEA

The consensus price target fell 15% to kr51.33, with the weaker earnings outlook clearly leading analyst valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on OKEA, with the most bullish analyst valuing it at kr55.00 and the most bearish at kr44.00 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting OKEA is an easy business to forecast or the underlying assumptions are obvious.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that OKEA's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 28% growth on an annualised basis. This is compared to a historical growth rate of 49% over the past five years. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 10% annually. Factoring in the forecast slowdown in growth, it's pretty clear that OKEA is still expected to grow faster than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for OKEA. Unfortunately, they also downgraded their revenue estimates, and our data indicates sales are expected to outperform the wider market. Even so, earnings per share are more important to the intrinsic value of the business. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

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 OKEA's business, like its declining profit margins. Learn more, and discover the 2 other warning signs we've identified, for free on our platform here.

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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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.