Stock Analysis

Earnings Beat: Seamless Distribution Systems AB (publ) Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

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Shareholders might have noticed that Seamless Distribution Systems AB (publ) (STO:SDS) filed its yearly result this time last week. The early response was not positive, with shares down 6.3% to kr40.75 in the past week. It looks like a credible result overall - although revenues of kr288m were what the analyst expected, Seamless Distribution Systems surprised by delivering a (statutory) profit of kr0.62 per share, an impressive 68% above what was forecast. The analyst typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analyst latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Seamless Distribution Systems

OM:SDS Earnings and Revenue Growth February 21st 2022

Following the latest results, Seamless Distribution Systems' lone analyst are now forecasting revenues of kr332.0m in 2022. This would be a solid 15% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to shoot up 139% to kr1.45. In the lead-up to this report, the analyst had been modelling revenues of kr351.0m and earnings per share (EPS) of kr1.72 in 2022. The analyst seem less optimistic after the recent results, reducing their sales forecasts and making a substantial drop in earnings per share numbers.

The consensus price target fell 15% to kr68.00, with the weaker earnings outlook clearly leading valuation estimates.

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. We would highlight that Seamless Distribution Systems' revenue growth is expected to slow, with the forecast 15% annualised growth rate until the end of 2022 being well below the historical 32% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 10% per year. So it's pretty clear that, while Seamless Distribution Systems' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The biggest concern is that the analyst reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Seamless Distribution Systems. They also downgraded their revenue estimates, although industry data suggests that Seamless Distribution Systems' revenues are expected to grow faster than the wider industry. The consensus price target fell measurably, with the analyst seemingly not reassured by the latest results, leading to a lower estimate of Seamless Distribution Systems' future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on Seamless Distribution Systems. Long-term earnings power is much more important than next year's profits. At least one analyst has provided forecasts out to 2024, which can be seen for free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 5 warning signs for Seamless Distribution Systems (1 can't be ignored) you should be aware of.

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