Some Analysts Just Cut Their Elmera Group ASA (OB:ELMRA) Estimates

Market forces rained on the parade of Elmera Group ASA (OB:ELMRA) shareholders today, when the analysts downgraded their forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic. Shares are up 7.9% to kr23.02 in the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

After the downgrade, the dual analysts covering Elmera Group are now predicting revenues of kr19b in 2022. If met, this would reflect a notable 8.8% improvement in sales compared to the last 12 months. Statutory earnings per share are anticipated to drop 14% to kr2.40 in the same period. Before this latest update, the analysts had been forecasting revenues of kr20b and earnings per share (EPS) of kr2.70 in 2022. So there's definitely been a decline in analyst sentiment in the latest consensus numbers, noting the considerable drop in EPS forecasts.

Check out our latest analysis for Elmera Group

The consensus price target fell 17% to kr28.50, with reduced earnings forecasts clearly tied to a lower valuation estimate. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Elmera Group, with the most bullish analyst valuing it at kr32.00 and the most bearish at kr25.00 per share. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.

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. It's pretty clear that there is an expectation that Elmera Group's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 12% growth on an annualised basis. This is compared to a historical growth rate of 32% over the past three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 2.2% annually. Even after the forecast slowdown in growth, it seems obvious that Elmera Group is also expected to grow faster than 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. On the plus side, there were no major changes to revenue estimates; although analyst forecasts do imply revenues will come in ahead of the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Elmera Group's future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on Elmera Group after today.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At least one analyst has provided forecasts out to 2024, which can be seen 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.

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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.