Market forces rained on the parade of Concentric AB (publ) (STO:COIC) shareholders today, when the covering analyst downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analyst has soured majorly on the business. At kr111, shares are up 4.1% in the past 7 days. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.
Following the latest downgrade, the single analyst covering Concentric provided consensus estimates of kr1.6b revenue in 2020, which would reflect a sizeable 22% decline on its sales over the past 12 months. Statutory earnings per share are supposed to dive 44% to kr4.66 in the same period. Prior to this update, the analyst had been forecasting revenues of kr2.0b and earnings per share (EPS) of kr7.12 in 2020. Indeed, we can see that the analyst is a lot more bearish about Concentric's prospects, administering a sizeable cut to revenue estimates and slashing their EPS estimates to boot.
It'll come as no surprise then, to learn that the analyst has cut their price target 10% to kr130.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 22%, a significant reduction from annual growth of 0.4% 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 4.9% next year. It's pretty clear that Concentric's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that the analyst cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that Concentric's revenues are expected to grow slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At least one analyst has provided forecasts out to 2022, which can be seen 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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