This Analyst Just Downgraded Their Fragbite Group AB (publ) (STO:FRAG) EPS Forecasts

Market forces rained on the parade of Fragbite Group AB (publ) (STO:FRAG) shareholders today, when the covering analyst downgraded their forecasts for next year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analyst factored in the latest outlook for the business, concluding that they were too optimistic previously. Bidders are definitely seeing a different story, with the stock price of kr3.40 reflecting a 19% rise in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

Following the downgrade, the most recent consensus for Fragbite Group from its solitary analyst is for revenues of kr283m in 2023 which, if met, would be a reasonable 6.7% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 38% to kr0.70. However, before this estimates update, the consensus had been expecting revenues of kr320m and kr0.60 per share in losses. Ergo, there's been a clear change in sentiment, with the analyst administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.

See our latest analysis for Fragbite Group

The consensus price target fell 20% to kr6.00, implicitly signalling that lower earnings per share are a leading indicator for Fragbite Group's valuation.

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. It's pretty clear that there is an expectation that Fragbite Group's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 5.3% growth on an annualised basis. This is compared to a historical growth rate of 89% over the past three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 7.7% per year. Factoring in the forecast slowdown in growth, it seems obvious that Fragbite Group is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that the analyst increased their loss per share estimates for next year. 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 next year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Fragbite Group.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2025, which can be seen for 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.

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.