Analyst Forecasts Just Became More Bearish On Karnov Group AB (publ) (STO:KAR)

Today is shaping up negative for Karnov Group AB (publ) (STO:KAR) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. The stock price has risen 4.7% to kr67.00 over the past week. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

Following the downgrade, the latest consensus from Karnov Group's three analysts is for revenues of kr1.2b in 2022, which would reflect a substantial 41% improvement in sales compared to the last 12 months. Per-share earnings are expected to surge 54% to kr1.22. Previously, the analysts had been modelling revenues of kr1.4b and earnings per share (EPS) of kr1.22 in 2022. So there's been a clear change in analyst sentiment in the recent update, with the analysts making a substantial drop in revenues and reconfirming their earnings per share estimates.

View our latest analysis for Karnov Group

The consensus price target rose 14% to kr74.00, with the analysts apparently satisfied with the business performance despite lower revenue forecasts. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Karnov Group at kr85.00 per share, while the most bearish prices it at kr65.00. This is a very narrow spread of estimates, implying either that Karnov Group is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting Karnov Group's growth to accelerate, with the forecast 41% annualised growth to the end of 2022 ranking favourably alongside historical growth of 5.9% per annum over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 21% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Karnov Group is expected to grow much faster than its industry.

The Bottom Line

The most obvious conclusion from this consensus update is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Given the stark change in sentiment, we'd understand if investors became more cautious on Karnov Group after today.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Karnov Group analysts - going out to 2024, 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.

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.