Time To Worry? Analysts Are Downgrading Their Ferronordic AB (publ) (STO:FNM) Outlook

Market forces rained on the parade of Ferronordic AB (publ) (STO:FNM) 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.

Following the latest downgrade, the three analysts covering Ferronordic provided consensus estimates of kr5.1b revenue in 2022, which would reflect a sizeable 24% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to plummet 62% to kr9.00 in the same period. Prior to this update, the analysts had been forecasting revenues of kr6.5b and earnings per share (EPS) of kr24.04 in 2022. Indeed, we can see that the analysts are a lot more bearish about Ferronordic's prospects, administering a sizeable cut to revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Ferronordic

It'll come as no surprise then, to learn that the analysts have cut their price target 46% to kr120. 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. Currently, the most bullish analyst values Ferronordic at kr200 per share, while the most bearish prices it at kr40.00. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 30% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 22% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 7.0% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Ferronordic is expected to lag the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Ferronordic. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Ferronordic.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Ferronordic's financials, such as recent substantial insider selling. For more information, you can click here to discover this and the 3 other flags 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.