Shareholders of Borregaard ASA (OB:BRG) will be pleased this week, given that the stock price is up 10% to kr97.00 following its latest yearly results. Revenues of kr5.1b were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at kr4.17, missing estimates by 6.6%. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
After the latest results, the three analysts covering Borregaard are now predicting revenues of kr5.24b in 2020. If met, this would reflect an okay 3.4% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to bounce 35% to kr5.63. In the lead-up to this report, analysts had been modelling revenues of kr5.22b and earnings per share (EPS) of kr5.49 in 2020. Analysts seem to have become more bullish on the business, judging by their new earnings per share estimates.
There's been no major changes to the consensus price target of kr108, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. The most optimistic Borregaard analyst has a price target of kr110 per share, while the most pessimistic values it at kr105. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. It's pretty clear that analysts expect Borregaard's revenue growth will slow down substantially, with revenues next year expected to grow 3.4%, compared to a historical growth rate of 4.8% over the past five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 4.1% next year. Factoring in the forecast slowdown in growth, it looks like analysts are expecting Borregaard to grow at about the same rate as the wider market.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around Borregaard's earnings potential next year. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall market. The consensus price target held steady at kr108, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that in mind, we wouldn't be too quick to come to a conclusion on Borregaard. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Borregaard analysts - going out to 2022, and you can see them free on our platform here.
You can also view our analysis of Borregaard's balance sheet, and whether we think Borregaard is carrying too much debt, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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