Celebrations may be in order for Secure Energy Services Inc. (TSE:SES) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects.
Following the upgrade, the consensus from six analysts covering Secure Energy Services is for revenues of CA$827m in 2021, implying a stressful 61% decline in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 90% to CA$0.037. Yet before this consensus update, the analysts had been forecasting revenues of CA$741m and losses of CA$0.078 per share in 2021. We can see there's definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to this year's revenue estimates, while at the same time reducing their loss estimates.
Despite these upgrades, the analysts have not made any major changes to their price target of CA$6.96, implying that their latest estimates don't have a long term impact on what they think the stock is worth. 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 Secure Energy Services at CA$8.50 per share, while the most bearish prices it at CA$5.50. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Secure Energy Services shareholders.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 84% by the end of 2021. This indicates a significant reduction from annual growth of 7.6% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 14% annually for the foreseeable future. It's pretty clear that Secure Energy Services' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The highlight for us was that the consensus reduced its estimated losses this year, perhaps suggesting Secure Energy Services is moving incrementally towards profitability. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at Secure Energy Services.
It's great to see the analysts upgrading their estimates, but the biggest highlight to us is that the business is expected to become profitable in the foreseeable future. For more information, you can click through to our free platform to learn more about these forecasts.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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