One thing we could say about the analysts on MEG Energy Corp. (TSE:MEG) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. Shares are up 6.7% to CA$23.46 in the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.
Following the latest downgrade, the three analysts covering MEG Energy provided consensus estimates of CA$4.1b revenue in 2023, which would reflect a substantial 33% decline on its sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of CA$5.4b in 2023. It looks like forecasts have become a fair bit less optimistic on MEG Energy, given the sizeable cut to revenue estimates.
There was no particular change to the consensus price target of CA$24.31, with MEG Energy'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. Currently, the most bullish analyst values MEG Energy at CA$30.00 per share, while the most bearish prices it at CA$19.00. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
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. We would highlight that sales are expected to reverse, with a forecast 33% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 16% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 1.4% per year. So it's pretty clear that MEG Energy's revenues are expected to shrink faster than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for this year. The analysts also expect revenues to shrink faster than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on MEG Energy after today.
But wait - there's more! We have estimates for MEG Energy from its three analysts out until 2024, and you can see them 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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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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