Downgrade: Here's How This Analyst Sees Napatech A/S (OB:NAPA) Performing In The Near Term

Market forces rained on the parade of Napatech A/S (OB:NAPA) shareholders today, when the covering analyst downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analyst factored in the latest outlook for the business, concluding that they were too optimistic previously.

After the downgrade, the consensus from Napatech's single analyst is for revenues of kr.127m in 2024, which would reflect a not inconsiderable 17% decline in sales compared to the last year of performance. Per-share losses are expected to explode, reaching kr.1.03 per share. However, before this estimates update, the consensus had been expecting revenues of kr.161m and kr.0.51 per share in losses. Ergo, there's been a clear change in sentiment, with the analyst administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

View our latest analysis for Napatech

The consensus price target was broadly unchanged at kr.23.46, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. Over the past five years, revenues have declined around 1.9% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 31% decline in revenue until the end of 2024. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 3.5% annually. So while a broad number of companies are forecast to grow, unfortunately Napatech is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Napatech. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that Napatech's revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Napatech.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Napatech, including a short cash runway. 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 backed by insiders.

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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.