Growth Investors: Industry Analysts Just Upgraded Their AltaGas Ltd. (TSE:ALA) Revenue Forecasts By 11%

Celebrations may be in order for AltaGas Ltd. (TSE:ALA) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. 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 twelve analysts covering AltaGas is for revenues of CA$12b in 2023, implying an uncomfortable 11% decline in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing CA$11b of revenue in 2023. The consensus has definitely become more optimistic, showing a substantial gain 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$31.60, suggesting the latest estimates were not enough to shift their view on the value of the business. 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. There are some variant perceptions on AltaGas, with the most bullish analyst valuing it at CA$36.00 and the most bearish at CA$28.00 per share. This is a very narrow spread of estimates, implying either that AltaGas is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

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. We would highlight that sales are expected to reverse, with a forecast 8.5% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 31% 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 1.2% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - AltaGas is expected to lag the wider industry.

The Bottom Line

The most important thing to take away from this upgrade is that analysts lifted their revenue estimates for next 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.

These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 4 potential flags with AltaGas, including its declining profit margins. You can learn more, and discover the 2 other flags 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.

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.