Party Time: Brokers Just Made Major Increases To Their Xebec Adsorption Inc. (CVE:XBC) Earnings Forecasts

Xebec Adsorption Inc. (CVE:XBC) shareholders will have a reason to smile today, with the analysts making substantial upgrades to next year's statutory forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with analysts modelling a real improvement in business performance. Investors have been pretty optimistic on Xebec Adsorption too, with the stock up 15% to CA$9.54 over the past week. It will be interesting to see if today's upgrade is enough to propel the stock even higher.

After this upgrade, Xebec Adsorption's twelve analysts are now forecasting revenues of CA$158m in 2021. This would be a huge 147% improvement in sales compared to the last 12 months. Losses are expected to turn into profits real soon, with the analysts forecasting CA$0.087 in per-share earnings. Previously, the analysts had been modelling revenues of CA$131m and earnings per share (EPS) of CA$0.078 in 2021. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.

See our latest analysis for Xebec Adsorption

With these upgrades, we're not surprised to see that the analysts have lifted their price target 49% to CA$9.70 per share. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Xebec Adsorption at CA$12.50 per share, while the most bearish prices it at CA$6.00. 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.

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 147% revenue growth 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 20% next year. 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 most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for next year, expecting improving business conditions. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. With a serious upgrade to expectations and a rising price target, it might be time to take another look at Xebec Adsorption.

These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 2 potential flag with Xebec Adsorption, including major dilution from new stock issuance in the past year. You can 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.