Need To Know: Analysts Just Made A Substantial Cut To Their Anaergia Inc. (TSE:ANRG) Estimates

Market forces rained on the parade of Anaergia Inc. (TSE:ANRG) shareholders today, when the analysts downgraded their forecasts for this year. 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.

Following the downgrade, the latest consensus from Anaergia's eight analysts is for revenues of CA$183m in 2023, which would reflect a solid 12% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 31% to CA$0.53. However, before this estimates update, the consensus had been expecting revenues of CA$266m and CA$0.47 per share in losses. 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 Anaergia

The consensus price target fell 20% to CA$3.79, 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 Anaergia analyst has a price target of CA$8.00 per share, while the most pessimistic values it at CA$1.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Anaergia's past performance and to peers in the same industry. We would highlight that Anaergia's revenue growth is expected to slow, with the forecast 16% annualised growth rate until the end of 2023 being well below the historical 22% growth over the last year. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 8.7% per year. Even after the forecast slowdown in growth, it seems obvious that Anaergia is also expected to grow faster 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 Anaergia. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better 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.

That said, the analysts might have good reason to be negative on Anaergia, given a short cash runway. Learn more, and discover the 2 other flags 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.

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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.