Analysts Are Betting On AltaGas Ltd. (TSE:ALA) With A Big Upgrade This Week

AltaGas Ltd. (TSE:ALA) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The analysts have sharply increased their revenue numbers, with a view that AltaGas will make substantially more sales than they'd previously expected.

Following the upgrade, the consensus from 13 analysts covering AltaGas is for revenues of CA$7.5b in 2021, implying a small 3.2% decline in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing CA$6.6b of revenue in 2021. It looks like there's been a clear increase in optimism around AltaGas, given the nice increase in revenue forecasts.

Check out our latest analysis for AltaGas

We'd point out that there was no major changes to their price target of CA$29.17, suggesting the latest estimates were not enough to shift their view on the value of the business. 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. The most optimistic AltaGas analyst has a price target of CA$32.00 per share, while the most pessimistic values it at CA$26.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting AltaGas is an easy business to forecast or the underlying assumptions are obvious.

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. We would highlight that sales are expected to reverse, with a forecast 6.3% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 26% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 1.2% per year. It's pretty clear that AltaGas' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The highlight for us was that analysts increased their revenue forecasts for AltaGas this year. They also expect company revenue to perform worse than the wider market. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at AltaGas.

Analysts are clearly in love with AltaGas at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as its declining profit margins. You can learn more, and discover the 3 other warning signs we've identified, for 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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