Bearish: Analysts Just Cut Their LMK Group AB (publ) (STO:LMKG) Revenue and EPS estimates

One thing we could say about the analysts on LMK Group AB (publ) (STO:LMKG) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. 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 dual analysts covering LMK Group provided consensus estimates of kr1.1b revenue in 2023, which would reflect a definite 8.4% decline on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 36% to kr1.39. Before this latest update, the analysts had been forecasting revenues of kr1.3b and earnings per share (EPS) of kr1.66 in 2023. So we can see that the consensus has become notably more bearish on LMK Group's outlook with these numbers, making a substantial drop in next year's revenue estimates. Furthermore, they expect the business to be loss-making next year, compared to their previous forecasts of a profit.

Our analysis indicates that LMKG is potentially undervalued!

The consensus price target fell 46% to kr16.55, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values LMK Group at kr21.00 per share, while the most bearish prices it at kr12.10. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 6.8% by the end of 2023. This indicates a significant reduction from annual growth of 2.8% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 3.0% annually for the foreseeable future. It's pretty clear that LMK Group's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts are expecting LMK Group to become unprofitable next year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

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 LMK Group's business, like the risk of cutting its dividend. For more information, you can click here to discover this and the 1 other warning sign we've identified.

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.