Analysts Just Shaved Their Romande Energie Holding SA (VTX:HREN) Forecasts Dramatically

The analysts covering Romande Energie Holding SA (VTX:HREN) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following the downgrade, the latest consensus from Romande Energie Holding's twin analysts is for revenues of CHF778m in 2023, which would reflect a satisfactory 5.6% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to soar 82% to CHF83.78. Previously, the analysts had been modelling revenues of CHF891m and earnings per share (EPS) of CHF97.47 in 2023. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a considerable drop in earnings per share numbers as well.

Check out our latest analysis for Romande Energie Holding

What's most unexpected is that the consensus price target rose 5.1% to CHF1,550, strongly implying the downgrade to forecasts is not expected to be more than a temporary blip. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Romande Energie Holding analyst has a price target of CHF1,600 per share, while the most pessimistic values it at CHF1,500. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Romande Energie Holding is an easy business to forecast or the underlying assumptions are obvious.

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. It's clear from the latest estimates that Romande Energie Holding's rate of growth is expected to accelerate meaningfully, with the forecast 5.6% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 3.2% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 4.9% annually. It seems obvious that as part of the brighter growth outlook, Romande Energie Holding is expected to grow 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 Romande Energie Holding. Sadly they also cut their revenue estimates, although at least the company is expected to perform a bit better than the wider market. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have analyst estimates for Romande Energie Holding going out as far as 2025, and you can see them 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 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.