Kid ASA Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

Investors in Kid ASA (OB:KID) had a good week, as its shares rose 7.0% to close at kr106 following the release of its yearly results. Results look mixed - while revenue fell marginally short of analyst estimates at kr3.1b, statutory earnings beat expectations 9.8%, with Kid reporting profits of kr9.46 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analyst is forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analyst latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Kid

Following the latest results, Kid's solitary analyst are now forecasting revenues of kr3.31b in 2022. This would be a modest 6.4% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to grow 17% to kr11.06. Before this earnings report, the analyst had been forecasting revenues of kr3.39b and earnings per share (EPS) of kr10.53 in 2022. So it's pretty clear that while sentiment around revenues has declined following the latest results, the analyst is now more bullish on the company's earnings power.

The consensus price target fell 6.9% to kr135, with the analyst signalling that the weaker revenue outlook was a more powerful indicator than the upgraded EPS forecasts.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Kid's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 6.4% growth on an annualised basis. This is compared to a historical growth rate of 22% over the past five years. Compare this to the 5 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 6.5% per year. So it's pretty clear that, while Kid's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Kid's earnings potential next year. They also downgraded their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider industry. Still, earnings per share are more important to value creation for shareholders. The consensus price target fell measurably, with the analyst seemingly not reassured by the latest results, leading to a lower estimate of Kid's future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on Kid. Long-term earnings power is much more important than next year's profits. At least one analyst has provided forecasts out to 2023, which can be seen for free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Kid , and understanding them should be part of your investment process.

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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.