Today is shaping up negative for Trican Well Service Ltd. (TSE:TCW) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
Following the latest downgrade, the ten analysts covering Trican Well Service provided consensus estimates of CA$465m revenue in 2020, which would reflect a stressful 27% decline on its sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of CA$519m in 2020. It looks like forecasts have become a fair bit less optimistic on Trican Well Service, given the substantial drop in revenue estimates.
There was no particular change to the consensus price target of CA$0.92, with Trican Well Service's latest outlook seemingly not enough to result in a change of valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Trican Well Service, with the most bullish analyst valuing it at CA$1.75 and the most bearish at CA$0.60 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue shrink 10% per year. So it's pretty clear that Trican Well Service sales are expected to decline at a faster rate than the wider industry.
The Bottom Line
The clear low-light was that analysts slashing their revenue forecasts for Trican Well Service this year. They're also forecasting for revenues to shrink at a quicker rate than companies in the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Trican Well Service.
Unanswered questions? At least one of Trican Well Service's ten analysts has provided estimates out to 2021, which can be seen for free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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