Shareholders in Sampo Oyj (HEL:SAMPO) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company’s business prospects. The market seems to be pricing in some improvement in the business too, with the stock up 6.3% over the past week, closing at €40.43. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.
Following the latest upgrade, the eleven analysts covering Sampo Oyj provided consensus estimates of €5.7b revenue in 2023, which would reflect a painful 30% decline on its sales over the past 12 months. Statutory earnings per share are presumed to step up 12% to €2.45. Before this latest update, the analysts had been forecasting revenues of €5.1b and earnings per share (EPS) of €2.42 in 2023. There’s clearly been a surge in bullishness around the company’s sales pipeline, even if there’s no real change in earnings per share forecasts.
It may not be a surprise to see that the analysts have reconfirmed their price target of €47.99, implying that the uplift in sales is not expected to greatly contribute to Sampo Oyj’s valuation in the near term. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. The most optimistic Sampo Oyj analyst has a price target of €58.00 per share, while the most pessimistic values it at €40.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Sampo Oyj’s past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 38% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 4.5% 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 7.7% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining – Sampo Oyj is expected to lag the wider industry.
The Bottom Line
The most obvious conclusion from this consensus update is that there’s been no major change in the business’ prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. Seeing the dramatic upgrade to this year’s forecasts, it might be time to take another look at Sampo Oyj.
Better yet, our automated discounted cash flow calculation (DCF) suggests Sampo Oyj could be moderately undervalued. For more information, you can click through to our platform to learn more about our valuation approach.