Analysts Just Made A Major Revision To Their PetroTal Corp. (TSE:TAL) Revenue Forecasts

Market forces rained on the parade of PetroTal Corp. (TSE:TAL) shareholders today, when the analysts downgraded their forecasts for this year. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. Investors however, have been notably more optimistic about PetroTal recently, with the stock price up a noteworthy 21% to CA$0.74 in the past week. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.

Following this downgrade, PetroTal's three analysts are forecasting 2023 revenues to be US$332m, approximately in line with the last 12 months. Statutory earnings per share are supposed to drop 15% to US$0.18 in the same period. Previously, the analysts had been modelling revenues of US$444m and earnings per share (EPS) of US$0.45 in 2023. Indeed, we can see that the analysts are a lot more bearish about PetroTal's prospects, administering a sizeable cut to revenue estimates and slashing their EPS estimates to boot.

Check out our latest analysis for PetroTal

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that PetroTal's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 1.5% growth on an annualised basis. This is compared to a historical growth rate of 60% over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue shrink 1.3% per year. So it's clear that despite the slowdown in growth, PetroTal is still expected to grow meaningfully faster than the wider industry.

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 PetroTal. Sadly they also cut their revenue estimates, although at least the company is expected to perform a bit better 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 PetroTal 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 PetroTal's business, like concerns around earnings quality. For more information, you can click here to discover this and the 2 other flags we've identified.

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.