Analysts Are More Bearish On Kelt Exploration Ltd. (TSE:KEL) Than They Used To Be

One thing we could say about the analysts on Kelt Exploration Ltd. (TSE:KEL) - 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 the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the downgrade, the latest consensus from Kelt Exploration's two analysts is for revenues of CA$649m in 2023, which would reflect a huge 24% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to increase 3.0% to CA$0.84. Before this latest update, the analysts had been forecasting revenues of CA$748m and earnings per share (EPS) of CA$0.95 in 2023. Indeed, we can see that the analysts are a lot more bearish about Kelt Exploration's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

Check out the opportunities and risks within the CA Oil and Gas industry.

Despite the cuts to forecast earnings, there was no real change to the CA$9.52 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Kelt Exploration at CA$14.25 per share, while the most bearish prices it at CA$7.00. 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 Kelt Exploration's rate of growth is expected to accelerate meaningfully, with the forecast 19% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 4.5% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 1.1% annually. It seems obvious that as part of the brighter growth outlook, Kelt Exploration is expected to grow 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. Sadly they also cut their revenue estimates, although at least the company is expected to perform a bit better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Kelt Exploration after the downgrade.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have analyst estimates for Kelt Exploration going out as far as 2023, and you can see them 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.