Industry Analysts Just Made A Notable Upgrade To Their Cenovus Energy Inc. (TSE:CVE) Revenue Forecasts

Cenovus Energy Inc. (TSE:CVE) shareholders will have a reason to smile today, with the analysts making substantial upgrades to next year's statutory forecasts. The analysts have sharply increased their revenue numbers, with a view that Cenovus Energy will make substantially more sales than they'd previously expected.

Following the upgrade, the latest consensus from Cenovus Energy's six analysts is for revenues of CA$54b in 2022, which would reflect a substantial 49% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to bounce 500% to CA$2.43. Before this latest update, the analysts had been forecasting revenues of CA$46b and earnings per share (EPS) of CA$2.33 in 2022. The forecasts seem more optimistic now, with a nice gain to revenue and a modest lift to earnings per share estimates.

View our latest analysis for Cenovus Energy

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of CA$21.50, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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. There are some variant perceptions on Cenovus Energy, with the most bullish analyst valuing it at CA$25.00 and the most bearish at CA$17.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Cenovus Energy's past performance and to peers in the same industry. It's clear from the latest estimates that Cenovus Energy's rate of growth is expected to accelerate meaningfully, with the forecast 38% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 12% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 8.0% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Cenovus Energy to grow faster than the wider industry.

The Bottom Line

The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for next year. They also upgraded their revenue estimates for next year, and sales are expected to grow faster than the wider market. Seeing the dramatic upgrade to next year's forecasts, it might be time to take another look at Cenovus Energy.

Using these estimates as a starting point, we've run a discounted cash flow calculation (DCF) on Cenovus Energy that suggests the company could be somewhat undervalued. You can learn more about our valuation methodology on our platform here.

You can also see our analysis of Cenovus Energy's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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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.