These Analysts Think LMK Group AB (publ)'s (STO:LMKG) Sales Are Under Threat

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. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

Following the downgrade, the consensus from twin analysts covering LMK Group is for revenues of kr1.3b in 2022, implying a discernible 4.0% decline in sales compared to the last 12 months. The losses are expected to disappear over the next year or so, with forecasts for a profit of kr3.63 per share this year. Previously, the analysts had been modelling revenues of kr1.4b and earnings per share (EPS) of kr5.47 in 2022. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a pretty serious decline to earnings per share numbers as well.

See our latest analysis for LMK Group

The consensus price target fell 45% to kr48.50, with the weaker earnings outlook clearly leading analyst valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on LMK Group, with the most bullish analyst valuing it at kr96.00 and the most bearish at kr40.00 per share. 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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 5.3% by the end of 2022. This indicates a significant reduction from annual growth of 0.3% over the last year. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 7.4% 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 biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for LMK Group. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of LMK Group's future valuation. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on LMK Group after today.

That said, the analysts might have good reason to be negative on LMK Group, given the risk of cutting its dividend. Learn more, and discover the 2 other flags we've identified, for free on our platform here.

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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.