It's been a good week for Selvaag Bolig ASA (OB:SBO) shareholders, because the company has just released its latest quarterly results, and the shares gained 5.8% to kr54.90. Revenues of kr810m fell slightly short of expectations, but earnings were a definite bright spot, with per-share profits of kr1.97 an impressive 24% ahead of estimates. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see analysts' latest post-earnings forecasts for next year.
Following the recent earnings report, the consensus fromtwin analysts covering Selvaag Bolig expects revenues of kr3.18b in 2020, implying a considerable 10% decline in sales compared to the last 12 months. Earnings per share are expected to plunge 29% to kr5.65 in the same period. In the lead-up to this report, analysts had been modelling revenues of kr2.62b and earnings per share (EPS) of kr4.49 in 2020. There has definitely been an improvement in perception after these results, with analysts noticeably increasing both their earnings and revenue estimates.
Despite these upgrades, analysts have not made any major changes to their price target of kr58.50, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Selvaag Bolig's past performance and to peers in the same market. These estimates imply that sales are expected to slow, with a forecast revenue decline of 10% a significant reduction from annual growth of 1.1% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the market are forecast to see their revenue decline -2.9% annually for the foreseeable future. So it's pretty clear that Selvaag Bolig's revenues are expected to grow faster than 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 Selvaag Bolig's earnings potential next year. Fortunately, they also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Selvaag Bolig. Long-term earnings power is much more important than next year's profits. We have analyst estimates for Selvaag Bolig going out as far as 2023, and you can see them free on our platform here.
You can also view our analysis of Selvaag Bolig's balance sheet, and whether we think Selvaag Bolig is carrying too much debt, for free on our platform here.
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