Industry Analysts Just Upgraded Their Elkem ASA (OB:ELK) Revenue Forecasts By 10%

Elkem ASA (OB:ELK) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts have sharply increased their revenue numbers, with a view that Elkem will make substantially more sales than they'd previously expected. The market may be pricing in some blue sky too, with the share price gaining 24% to kr37.04 in the last 7 days. We'll be curious to see if these new estimates convince the market to lift the stock price higher still.

Following the upgrade, the most recent consensus for Elkem from its six analysts is for revenues of kr45b in 2022 which, if met, would be a satisfactory 5.1% increase on its sales over the past 12 months. Statutory earnings per share are supposed to fall 11% to kr12.50 in the same period. Before this latest update, the analysts had been forecasting revenues of kr41b and earnings per share (EPS) of kr12.12 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.

See our latest analysis for Elkem

Despite these upgrades, the analysts have not made any major changes to their price target of kr47.00, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. 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. There are some variant perceptions on Elkem, with the most bullish analyst valuing it at kr60.00 and the most bearish at kr35.00 per share. 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.

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 Elkem's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 10% growth on an annualised basis. This is compared to a historical growth rate of 22% over the past three years. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 1.5% annually. So it's clear that despite the slowdown in growth, Elkem is still expected to grow meaningfully 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. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Elkem.

Analysts are clearly in love with Elkem at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as recent substantial insider selling. For more information, you can click through to our platform to learn more about this and the 2 other warning signs we've identified .

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.