These Analysts Just Made A Sizeable Downgrade To Their Grenergy Renovables, S.A. (BME:GRE) EPS Forecasts

One thing we could say about the analysts on Grenergy Renovables, S.A. (BME:GRE) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After the downgrade, the consensus from Grenergy Renovables' seven analysts is for revenues of €218m in 2023, which would reflect a stressful 25% decline in sales compared to the last year of performance. Statutory earnings per share are presumed to surge 162% to €0.90. Before this latest update, the analysts had been forecasting revenues of €250m and earnings per share (EPS) of €1.19 in 2023. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.

Check out our latest analysis for Grenergy Renovables

Analysts made no major changes to their price target of €40.15, suggesting the downgrades are not expected to have a long-term impact on Grenergy Renovables' valuation. 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. Currently, the most bullish analyst values Grenergy Renovables at €47.00 per share, while the most bearish prices it at €34.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Grenergy Renovables shareholders.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 25% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 42% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 1.6% per year. So it's pretty clear that Grenergy Renovables' revenues are expected to shrink 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 Grenergy Renovables. Unfortunately they also downgraded their revenue estimates, and our aggregation of analyst estimates suggests that Grenergy Renovables revenue is expected to perform worse than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Grenergy Renovables after the downgrade.

That said, the analysts might have good reason to be negative on Grenergy Renovables, given dilutive stock issuance over the past year. For more information, you can click here to discover this and the 3 other flags we've identified.

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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.