Yahoo Finance Things Look Grim For PrairieSky Royalty Ltd. (TSE:PSK) After Today's Downgrade
One thing we could say about the analysts on PrairieSky Royalty Ltd. (TSE:PSK) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Bidders are definitely seeing a different story, with the stock price of CA$9.45 reflecting a 16% rise 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.
Following the latest downgrade, the five analysts covering PrairieSky Royalty provided consensus estimates of CA$148m revenue in 2020, which would reflect a sizeable 36% decline on its sales over the past 12 months. After this downgrade, the company is anticipated to report a loss of CA$0.05 in 2020, a sharp decline from a profit over the last year. Previously, the analysts had been modelling revenues of CA$220m and earnings per share (EPS) of CA$0.30 in 2020. So we can see that the consensus has become notably more bearish on PrairieSky Royalty'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.
Check out our latest analysis for PrairieSky Royalty
The consensus price target fell 5.4% to CA$11.34, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic PrairieSky Royalty analyst has a price target of CA$15.00 per share, while the most pessimistic values it at CA$7.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
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. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue shrink 0.3% per year. While this is interesting, PrairieSky Royalty's, revenues are still expected to shrink next year, and at a faster rate than the wider industry.
The Bottom Line
The most important thing to take away is that analysts are expecting PrairieSky Royalty to become unprofitable this year. Unfortunately they also downgraded their revenue estimates, and our aggregation of analyst estimates suggests that PrairieSky Royalty revenue is expected to perform worse 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.
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 PrairieSky Royalty's business, like the risk of cutting its dividend. For more information, you can click here to discover this and the 1 other warning sign we've identified.
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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