Market forces rained on the parade of Questerre Energy Corporation (TSE:QEC) shareholders today, when the covering analyst downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analyst factored in the latest outlook for the business, concluding that they were too optimistic previously. The stock price has risen 5.3% to CA$0.10 over the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.
Following the downgrade, the consensus from solo analyst covering Questerre Energy is for revenues of CA$24m in 2020, implying a disturbing 22% decline in sales compared to the last 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analyst forecasting losses of CA$0.038 per share in 2020. Prior to this update, the analyst had been forecasting revenues of CA$50m and earnings per share (EPS) of CA$0.018 in 2020. So we can see that the consensus has become notably more bearish on Questerre Energy's outlook with these numbers, making a pretty serious reduction to this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 22% revenue decline a notable change from historical growth of 8.6% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 0.8% annually for the foreseeable future. It's pretty clear that Questerre Energy's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that the analyst is expecting Questerre Energy to become unprofitable this year. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that Questerre Energy's revenues are expected to grow slower than the wider market. Given the serious cut to this year's outlook, it's clear that the analyst has turned more bearish on Questerre Energy, and we wouldn't blame shareholders for feeling a little more cautious themselves.
After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Questerre Energy's business, like dilutive stock issuance over the past year. For more information, you can click here to discover this and the 2 other warning signs we've identified.
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