News Flash: 4 Analysts Think Mips AB (publ) (STO:MIPS) Earnings Are Under Threat

One thing we could say about the analysts on Mips AB (publ) (STO:MIPS) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the latest downgrade, the four analysts covering Mips provided consensus estimates of kr472m revenue in 2023, which would reflect a considerable 8.1% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to decline 16% to kr4.55 in the same period. Before this latest update, the analysts had been forecasting revenues of kr582m and earnings per share (EPS) of kr6.74 in 2023. Indeed, we can see that the analysts are a lot more bearish about Mips' prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for Mips

The average price target climbed 5.6% to kr525 despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Mips, with the most bullish analyst valuing it at kr610 and the most bearish at kr480 per share. This is a very narrow spread of estimates, implying either that Mips is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 16% by the end of 2023. This indicates a significant reduction from annual growth of 30% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 9.2% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Mips 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 Mips. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The rising price target is a puzzle, but still - with a serious cut to this year's outlook, we wouldn't be surprised if investors were a bit wary of Mips.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Mips going out to 2025, and you can see them 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.