Rainbows and Unicorns: Capital Power Corporation (TSE:CPX) Analysts Just Became A Lot More Optimistic

Celebrations may be in order for Capital Power Corporation (TSE:CPX) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals.

Following the latest upgrade, the eight analysts covering Capital Power provided consensus estimates of CA$2.9b revenue in 2024, which would reflect a stressful 25% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to sink 20% to CA$3.89 in the same period. Before this latest update, the analysts had been forecasting revenues of CA$2.1b and earnings per share (EPS) of CA$2.93 in 2024. 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 Capital Power

Despite these upgrades, the consensus price target fell 5.0% to CA$41.09, perhaps signalling that the uplift in performance is not expected to last.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with a forecast 32% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 23% 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 4.2% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Capital Power is expected to lag the wider industry.

The Bottom Line

The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. A lower price target is not intuitively what we would expect from a company whose business prospects are improving - at least judging by these forecasts - but if the underlying fundamentals are strong, Capital Power could be one for the watch list.

Analysts are clearly in love with Capital Power at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as recent substantial insider selling. You can learn more, and discover the 3 other risks we've identified, for free on our platform here.

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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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.