One Seamless Distribution Systems AB (publ) (STO:SDS) Analyst Has Been Cutting Their Forecasts

Today is shaping up negative for Seamless Distribution Systems AB (publ) (STO:SDS) shareholders, with the covering analyst delivering a substantial negative revision to next year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analyst seeing grey clouds on the horizon. Surprisingly the share price has been buoyant, rising 18% to kr8.88 in the past 7 days. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.

Following the latest downgrade, the current consensus, from the solo analyst covering Seamless Distribution Systems, is for revenues of kr272m in 2023, which would reflect a discernible 5.2% reduction in Seamless Distribution Systems' sales over the past 12 months. Losses are supposed to balloon 178% to kr1.10 per share. Previously, the analyst had been modelling revenues of kr309m and earnings per share (EPS) of kr0.60 in 2023. So we can see that the consensus has become notably more bearish on Seamless Distribution Systems' outlook with these numbers, making a measurable cut to next year's revenue estimates. Furthermore, they expect the business to be loss-making next year, compared to their previous forecasts of a profit.

See our latest analysis for Seamless Distribution Systems

The consensus price target fell 60% to kr21.00, implicitly signalling that lower earnings per share are a leading indicator for Seamless Distribution Systems' valuation.

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. We would highlight that sales are expected to reverse, with a forecast 4.2% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 28% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 17% per year. It's pretty clear that Seamless Distribution Systems' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Seamless Distribution Systems dropped from profits to a loss next year. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that Seamless Distribution Systems' revenues are expected to grow slower than the wider market. After such a stark change in sentiment from the analyst, we'd understand if readers now felt a bit wary of Seamless Distribution Systems.

That said, this broker might have good reason to be negative on Seamless Distribution Systems, given dilutive stock issuance over the past year. Learn more, and discover the 1 other risk we've identified, for free on our platform here.

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.

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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.