The Strax AB (publ) (STO:STRAX) Analysts Have Been Trimming Their Sales Forecasts

Today is shaping up negative for Strax AB (publ) (STO:STRAX) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the latest downgrade, the two analysts covering Strax provided consensus estimates of €58m revenue in 2023, which would reflect a stressful 26% decline on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 60% to €0.049. Yet before this consensus update, the analysts had been forecasting revenues of €90m and losses of €0.049 per share in 2023. So there's definitely been a change in sentiment in this update, with the analysts administering a substantial haircut to this year's revenue estimates, while at the same time holding losses per share steady.

Check out our latest analysis for Strax

The consensus price target fell 6.1% to kr2.30, with the analysts clearly concerned about the weaker revenue outlook and expectation of ongoing losses.

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. Over the past five years, revenues have declined around 1.5% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 46% decline in revenue until the end of 2023. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to decline 1.6% annually. While this is interesting, Strax's, revenues are still expected to shrink next year, and at a faster rate than the wider industry.

The Bottom Line

Unfortunately they also cut their revenue estimates for this year, and they expect sales to lag the wider market. That said, earnings per share are more important for creating value for shareholders. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Strax's future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on Strax after today.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Strax's business, like a weak balance sheet. Learn more, and discover the 2 other warning signs we've identified, for free on our platform here.

You can also see our analysis of Strax's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.