engcon AB (publ) (STO:ENGCON B) Released Earnings Last Week And Analysts Lifted Their Price Target To kr77.50

A week ago, engcon AB (publ) (STO:ENGCON B) came out with a strong set of annual numbers that could potentially lead to a re-rate of the stock. The company beat expectations with revenues of kr1.9b arriving 3.8% ahead of forecasts. Statutory earnings per share (EPS) were kr2.01, 3.8% ahead of estimates. The analyst typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimate suggests is in store for next year.

Check out our latest analysis for engcon

Taking into account the latest results, the current consensus from engcon's one analyst is for revenues of kr2.07b in 2023, which would reflect a satisfactory 6.6% increase on its sales over the past 12 months. Statutory earnings per share are predicted to swell 13% to kr2.28. In the lead-up to this report, the analyst had been modelling revenues of kr2.11b and earnings per share (EPS) of kr2.20 in 2023. If anything, the analyst looks to have become slightly more optimistic overall; while they decreased their revenue forecasts, EPS predictions increased and ultimately earnings are more important.

The average price target increased 23% to kr77.50, with the analyst signalling that the improved earnings outlook is more important to the company's valuation than its revenue.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that engcon's revenue growth is expected to slow, with the forecast 6.6% annualised growth rate until the end of 2023 being well below the historical 17% p.a. growth over the last three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 3.4% annually. Even after the forecast slowdown in growth, it seems obvious that engcon is also expected to grow faster than the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around engcon's earnings potential next year. They also downgraded their revenue estimates, although industry data suggests that engcon's revenues are expected to grow faster than the wider industry. Still, earnings are more important to the intrinsic value of the business. There was also a nice increase in the price target, with the analyst clearly feeling that the intrinsic value of the business is improving.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have analyst estimates for engcon going out as far as 2024, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 1 warning sign for engcon you should be aware of.

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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.