Analyst Forecasts Just Got A Lot More Bearish On Xebec Adsorption Inc. (TSE:XBC)

Market forces rained on the parade of Xebec Adsorption Inc. (TSE:XBC) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the downgrade, the current consensus from Xebec Adsorption's 13 analysts is for revenues of CA$123m in 2021 which - if met - would reflect a major 117% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 90% to CA$0.034. Prior to this update, the analysts had been forecasting revenues of CA$142m and earnings per share (EPS) of CA$0.039 in 2021. So we can see that the consensus has become notably more bearish on Xebec Adsorption's outlook with these numbers, making a measurable cut 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.

See our latest analysis for Xebec Adsorption

The consensus price target fell 15% to CA$6.10, implicitly signalling that lower earnings per share are a leading indicator for Xebec Adsorption's valuation. 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 Xebec Adsorption, with the most bullish analyst valuing it at CA$10.00 and the most bearish at CA$6.00 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

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. It's clear from the latest estimates that Xebec Adsorption's rate of growth is expected to accelerate meaningfully, with the forecast 117% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 42% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 21% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Xebec Adsorption to grow faster than the wider industry.

The Bottom Line

The biggest low-light for us was that the forecasts for Xebec Adsorption dropped from profits to a loss this year. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Xebec Adsorption.

There might be good reason for analyst bearishness towards Xebec Adsorption, like major dilution from new stock issuance in the past year. Learn more, and discover the 1 other flag 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 decide to trade Xebec Adsorption, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.