Stock Analysis

Earnings Miss: Castellum AB (publ) Missed EPS By 73% And Analysts Are Revising Their Forecasts

OM:CAST
Source: Shutterstock

Castellum AB (publ) (STO:CAST) shareholders are probably feeling a little disappointed, since its shares fell 6.4% to kr142 in the week after its latest annual results. Statutory earnings per share fell badly short of expectations, coming in at kr5.29, some 73% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at kr9.0b. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Castellum after the latest results.

View our latest analysis for Castellum

earnings-and-revenue-growth
OM:CAST Earnings and Revenue Growth February 16th 2023

Following the latest results, Castellum's seven analysts are now forecasting revenues of kr9.47b in 2023. This would be a reasonable 5.3% improvement in sales compared to the last 12 months. The company is forecast to report a statutory loss of kr2.50 in 2023, a sharp decline from a profit over the last year. Before this earnings announcement, the analysts had been modelling revenues of kr9.56b and losses of kr0.84 per share in 2023. So it's pretty clear the analysts have mixed opinions on Castellum even after this update; although they reconfirmed their revenue numbers, it came at the cost of a massive increase in per-share losses.

With the increase in forecast losses for next year, it's perhaps no surprise to see that the average price target dipped 5.1% to kr139, with the analysts signalling that growing losses would be a definite concern. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Castellum, with the most bullish analyst valuing it at kr180 and the most bearish at kr100.00 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that there is an expectation that Castellum'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 11% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 6.5% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Castellum.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Castellum's future valuation.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Castellum going out to 2025, and you can see them free on our platform here.

Even so, be aware that Castellum is showing 3 warning signs in our investment analysis , and 1 of those is a bit concerning...

New: AI Stock Screener & Alerts

Our new AI Stock Screener scans the market every day to uncover opportunities.

• Dividend Powerhouses (3%+ Yield)
• Undervalued Small Caps with Insider Buying
• High growth Tech and AI Companies

Or build your own from over 50 metrics.

Explore Now for Free

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.