One Nepa AB (publ) (STO:NEPA) Analyst Just Cut Their EPS Forecasts

One thing we could say about the covering analyst on Nepa AB (publ) (STO:NEPA) - 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 the analyst factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the current consensus, from the solo analyst covering Nepa, is for revenues of kr301m in 2023, which would reflect a considerable 11% reduction in Nepa's sales over the past 12 months. Per-share earnings are expected to soar 48% to kr3.30. Prior to this update, the analyst had been forecasting revenues of kr339m and earnings per share (EPS) of kr3.70 in 2023. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a real cut to earnings per share numbers as well.

View our latest analysis for Nepa

It'll come as no surprise then, to learn that the analyst has cut their price target 25% to kr80.00.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 11% by the end of 2023. This indicates a significant reduction from annual growth of 8.5% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 13% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Nepa is expected to lag the wider industry.

The Bottom Line

The biggest issue in the new estimates is that the analyst has reduced their earnings per share estimates, suggesting business headwinds lay ahead for Nepa. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that Nepa's revenues are expected to grow 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.

There might be good reason for analyst bearishness towards Nepa, like its declining profit margins. For more information, you can click here to discover this and the 4 other concerns we've identified.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies 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.