Downgrade: Here's How This Analyst Sees CTEK AB (publ) (STO:CTEK) Performing In The Near Term

The latest analyst coverage could presage a bad day for CTEK AB (publ) (STO:CTEK), with the covering analyst making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. 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.

Following the latest downgrade, the sole analyst covering CTEK provided consensus estimates of kr920m revenue in 2022, which would reflect a perceptible 3.2% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to decrease 2.8% to kr0.76 in the same period. Prior to this update, the analyst had been forecasting revenues of kr1.0b and earnings per share (EPS) of kr1.31 in 2022. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a pretty serious decline to earnings per share numbers as well.

See our latest analysis for CTEK

Despite the cuts to forecast earnings, there was no real change to the kr62.00 price target, showing that the analyst don't think the changes have a meaningful impact on its intrinsic value.

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. We would highlight that sales are expected to reverse, with a forecast 3.2% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 15% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 28% per year. It's pretty clear that CTEK's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that the analyst cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that CTEK's revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on CTEK after the downgrade.

That said, this broker might have good reason to be negative on CTEK, given its declining profit margins. For more information, you can click here to discover 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.