Cause For Concern? One Analyst Thinks MMA Offshore Limited's (ASX:MRM) Revenues Are Under Threat

Simply Wall St
·3 min read

One thing we could say about the covering analyst on MMA Offshore Limited (ASX:MRM) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic. Surprisingly the share price has been buoyant, rising 10% to AU$0.33 in the past 7 days. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.

Following the downgrade, the consensus from single analyst covering MMA Offshore is for revenues of AU$241m in 2021, implying an uncomfortable 8.0% decline in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 96% to AU$0.021. However, before this estimates update, the consensus had been expecting revenues of AU$280m and AU$0.01 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analyst making a serious cut to their revenue forecasts while also expecting losses per share to increase.

See our latest analysis for MMA Offshore

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These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the MMA Offshore's past performance and to peers in the same industry. We would also point out that the forecast 15% annualised revenue decline to the end of 2021 is roughly in line with the historical trend, which saw revenues shrink 14% annually over the past five years By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 7.0% per year. So it's pretty clear that, while it does have declining revenues, the analyst also expect MMA Offshore to suffer worse than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at MMA Offshore. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that MMA Offshore's revenues are expected to grow slower than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on MMA Offshore after today.

There might be good reason for analyst bearishness towards MMA Offshore, like major dilution from new stock issuance in the past year. Learn more, and discover the 2 other flags we've identified, for 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.

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. 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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