Time To Worry? Analysts Just Downgraded Their NuVista Energy Ltd. (TSE:NVA) Outlook

Market forces rained on the parade of NuVista Energy Ltd. (TSE:NVA) shareholders today, when the analysts downgraded their forecasts for next year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following this downgrade, NuVista Energy's dual analysts are forecasting 2024 revenues to be CA$1.3b, approximately in line with the last 12 months. Statutory earnings per share are supposed to fall 15% to CA$1.79 in the same period. Prior to this update, the analysts had been forecasting revenues of CA$1.5b and earnings per share (EPS) of CA$1.97 in 2024. It looks like analyst sentiment has fallen somewhat in this update, with a substantial drop in revenue estimates and a small dip in earnings per share numbers as well.

View our latest analysis for NuVista Energy

Analysts made no major changes to their price target of CA$16.21, suggesting the downgrades are not expected to have a long-term impact on NuVista Energy's valuation.

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 pretty clear that there is an expectation that NuVista Energy's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 0.5% growth on an annualised basis. This is compared to a historical growth rate of 27% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 5.9% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than NuVista Energy.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for NuVista Energy. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on NuVista Energy after today.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with NuVista Energy's business, like recent substantial insider selling. Learn more, and discover the 1 other concern we've identified, for 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.

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

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.