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News Flash: 6 Analysts Think Serko Limited (NZSE:SKO) Earnings Are Under Threat

·3-min read

One thing we could say about the analysts on Serko Limited (NZSE:SKO) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

After the downgrade, the six analysts covering Serko are now predicting revenues of NZ$41m in 2023. If met, this would reflect a major 116% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 26% to NZ$0.22. Yet before this consensus update, the analysts had been forecasting revenues of NZ$50m and losses of NZ$0.19 per share in 2023. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for Serko

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earnings-and-revenue-growth

There was no major change to the consensus price target of NZ$6.34, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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. There are some variant perceptions on Serko, with the most bullish analyst valuing it at NZ$8.95 and the most bearish at NZ$4.50 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

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. The analysts are definitely expecting Serko's growth to accelerate, with the forecast 116% annualised growth to the end of 2023 ranking favourably alongside historical growth of 0.5% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 18% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Serko is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Serko after the downgrade.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Serko analysts - going out to 2025, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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