Yahoo Finance Vermilion Energy Inc. (TSE:VET) Analysts Just Cut Their EPS Forecasts Substantially
One thing we could say about the analysts on Vermilion Energy Inc. (TSE:VET) - 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) forecasts went under the knife, suggesting the analysts have soured majorly on the business. Surprisingly the share price has been buoyant, rising 20% to CA$6.28 in the past 7 days. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.
Following the latest downgrade, the ten analysts covering Vermilion Energy provided consensus estimates of CA$969m revenue in 2020, which would reflect a substantial 30% decline on its sales over the past 12 months. Per-share losses are expected to creep up to CA$8.97. Yet prior to the latest estimates, the analysts had been forecasting revenues of CA$1.1b and losses of CA$1.56 per share in 2020. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
View our latest analysis for Vermilion Energy
There was no major change to the consensus price target of CA$6.69, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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 Vermilion Energy, with the most bullish analyst valuing it at CA$10.00 and the most bearish at CA$4.50 per share. 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Vermilion Energy's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 30%, a significant reduction from annual growth of 14% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 0.6% next year. It's pretty clear that Vermilion Energy's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Vermilion Energy. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Vermilion Energy after the downgrade.
That said, the analysts might have good reason to be negative on Vermilion Energy, given recent substantial insider selling. For more information, you can click here to discover this and the 3 other flags 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.
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