One thing we could say about the analysts on EnQuest PLC (LON:ENQ) - 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 analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
After this downgrade, EnQuest's three analysts are now forecasting revenues of US$1.5b in 2022. This would be a decent 16% improvement in sales compared to the last 12 months. Per-share earnings are expected to leap 26% to US$0.26. Previously, the analysts had been modelling revenues of US$1.7b and earnings per share (EPS) of US$0.32 in 2022. Indeed, we can see that the analysts are a lot more bearish about EnQuest's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
The average price target climbed 12% to US$0.62 despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes. 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. The most optimistic EnQuest analyst has a price target of US$0.60 per share, while the most pessimistic values it at US$0.42. This is a very narrow spread of estimates, implying either that EnQuest is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
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. The analysts are definitely expecting EnQuest's growth to accelerate, with the forecast 16% annualised growth to the end of 2022 ranking favourably alongside historical growth of 8.1% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue shrink 2.5% per year. So it's clear with the acceleration in growth, EnQuest is expected to grow meaningfully faster than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately, they also downgraded their revenue estimates, and our data indicates sales are expected to outperform the wider market. Even so, earnings per share are more important to the intrinsic value of the business. The rising price target is a puzzle, but still - with a serious cut to this year's outlook, we wouldn't be surprised if investors were a bit wary of EnQuest.
There might be good reason for analyst bearishness towards EnQuest, like dilutive stock issuance over the past year. Learn more, and discover the 3 other warning signs we've identified, for free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks 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.