Market forces rained on the parade of Frøy ASA (OB:FROY) shareholders today, when the analysts downgraded their 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. At kr48.00, shares are up 5.5% in the past 7 days. It will be interesting to see if this downgrade motivates investors to start selling their holdings.
After the downgrade, the consensus from Frøy's two analysts is for revenues of kr1.6b in 2022, which would reflect a noticeable 7.8% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to decline 13% to kr3.33 in the same period. Before this latest update, the analysts had been forecasting revenues of kr2.1b and earnings per share (EPS) of kr4.16 in 2022. Indeed, we can see that the analysts are a lot more bearish about Frøy's prospects, administering a sizeable cut to revenue estimates and slashing their EPS estimates to boot.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that sales are expected to reverse, with a forecast 10% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 22% over the last year. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.5% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Frøy is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After a cut like that, investors could be forgiven for thinking analysts are a lot more bearish on Frøy, and a few readers might choose to steer clear of the stock.
So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Frøy, including concerns around earnings quality. Learn more, and discover the 1 other warning sign we've identified, for free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Valuation is complex, but we're helping make it simple.
Find out whether Frøy is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis