New Forecasts: Here's What Analysts Think The Future Holds For STEP Energy Services Ltd. (TSE:STEP)

Shareholders in STEP Energy Services Ltd. (TSE:STEP) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. Investors have been pretty optimistic on STEP Energy Services too, with the stock up 17% to CA$4.90 over the past week. Could this upgrade be enough to drive the stock even higher?

Following the upgrade, the current consensus from STEP Energy Services' seven analysts is for revenues of CA$886m in 2022 which - if met - would reflect a huge 43% increase on its sales over the past 12 months. The losses are expected to disappear over the next year or so, with forecasts for a profit of CA$0.56 per share this year. Before this latest update, the analysts had been forecasting revenues of CA$752m and earnings per share (EPS) of CA$0.24 in 2022. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.

Check out our latest analysis for STEP Energy Services

It will come as no surprise to learn that the analysts have increased their price target for STEP Energy Services 36% to CA$6.71 on the back of these upgrades. 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 STEP Energy Services analyst has a price target of CA$8.00 per share, while the most pessimistic values it at CA$6.00. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. For example, we noticed that STEP Energy Services' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 61% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 1.8% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 6.2% per year. Not only are STEP Energy Services' revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, STEP Energy Services could be worth investigating further.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple STEP Energy Services analysts - going out to 2024, and you can see them 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.