The latest analyst coverage could presage a bad day for AB Fagerhult (STO:FAG), with the covering analyst making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analyst has soured majorly on the business. Investors however, have been notably more optimistic about AB Fagerhult recently, with the stock price up a notable 19% to kr38.00 in the past week. 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 lone analyst covering AB Fagerhult, is for revenues of kr6.7b in 2020, which would reflect an uneasy 15% reduction in AB Fagerhult's sales over the past 12 months. Statutory earnings per share are anticipated to plummet 72% to kr0.67 in the same period. Before this latest update, the analyst had been forecasting revenues of kr8.4b and earnings per share (EPS) of kr3.43 in 2020. Indeed, we can see that the analyst is a lot more bearish about AB Fagerhult's prospects, administering a measurable 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 32% to kr43.00.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the AB Fagerhult's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 15% revenue decline a notable change from historical growth of 15% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 29% annually for the foreseeable future. It's pretty clear that AB Fagerhult'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 AB Fagerhult'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.
A high debt burden combined with a downgrade of this magnitude always gives us some reason for concern, especially if these forecasts are just the first sign of a business downturn. To see more of our financial analysis, you can click through to our free platform to learn more about its balance sheet and specific concerns we've identified.
We also provide an overview of the AB Fagerhult Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.