Yahoo Finance Shorn Like A Sheep: Analysts Just Shaved Their PetroShale Inc. (CVE:PSH) Forecasts Dramatically
One thing we could say about the analysts on PetroShale Inc. (CVE:PSH) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. Investors however, have been notably more optimistic about PetroShale recently, with the stock price up a noteworthy 22% to CA$0.11 in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.
After the downgrade, the twin analysts covering PetroShale are now predicting revenues of CA$190m in 2020. If met, this would reflect a substantial 59% improvement in sales compared to the last 12 months. Per-share earnings are expected to climb 13% to CA$0.09. Previously, the analysts had been modelling revenues of CA$242m and earnings per share (EPS) of CA$0.16 in 2020. Indeed, we can see that the analysts are a lot more bearish about PetroShale's prospects, administering a sizeable cut to revenue estimates and slashing their EPS estimates to boot.
See our latest analysis for PetroShale
It'll come as no surprise then, to learn that the analysts have cut their price target 56% to CA$0.40. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values PetroShale at CA$0.75 per share, while the most bearish prices it at CA$0.20. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. 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.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. Next year brings more of the same, according to the analysts, with revenue forecast to grow 59%, in line with its 49% annual growth over the past five years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 0.8% next year. So it's pretty clear that PetroShale is forecast to grow substantially faster than its industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for PetroShale. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
There might be good reason for analyst bearishness towards PetroShale, like concerns around earnings quality. Learn more, and discover the 4 other flags we've identified, 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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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