Time To Worry? Analysts Just Downgraded Their Sensys Gatso Group AB (publ) (STO:SENS) Outlook

One thing we could say about the analysts on Sensys Gatso Group AB (publ) (STO:SENS) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the downgrade, the most recent consensus for Sensys Gatso Group from its two analysts is for revenues of kr641m in 2022 which, if met, would be a major 37% increase on its sales over the past 12 months. Per-share earnings are expected to shoot up 202% to kr0.08. Previously, the analysts had been modelling revenues of kr735m and earnings per share (EPS) of kr0.085 in 2022. It looks like analyst sentiment has fallen somewhat in this update, with a substantial drop in revenue estimates and a small dip in earnings per share numbers as well.

See our latest analysis for Sensys Gatso Group

It'll come as no surprise then, to learn that the analysts have cut their price target 18% to kr1.73. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Sensys Gatso Group at kr1.90 per share, while the most bearish prices it at kr1.55. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Sensys Gatso Group's rate of growth is expected to accelerate meaningfully, with the forecast 28% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 5.5% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 10% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Sensys Gatso Group is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Sensys Gatso Group's future valuation. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Sensys Gatso Group after today.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have analyst estimates for Sensys Gatso Group going out as far as 2023, and you can see them free on our platform here.

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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.