These Analysts Think Solaria Energía y Medio Ambiente, S.A.'s (BME:SLR) Sales Are Under Threat

One thing we could say about the analysts on Solaria Energía y Medio Ambiente, S.A. (BME:SLR) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

After the downgrade, the twelve analysts covering Solaria Energía y Medio Ambiente are now predicting revenues of €104m in 2021. If met, this would reflect a huge 74% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to reduce 4.6% to €0.27 in the same period. Previously, the analysts had been modelling revenues of €116m and earnings per share (EPS) of €0.28 in 2021. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a substantial drop in revenue estimates and a small dip in EPS estimates to boot.

View our latest analysis for Solaria Energía y Medio Ambiente

The average price target climbed 6.7% to €22.77 despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Solaria Energía y Medio Ambiente at €35.00 per share, while the most bearish prices it at €11.90. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

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 Solaria Energía y Medio Ambiente's rate of growth is expected to accelerate meaningfully, with the forecast 74% revenue growth noticeably faster than its historical growth of 23% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 11% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Solaria Energía y Medio Ambiente is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. There was also an increase in the price target, suggesting that there is more optimism baked into the forecasts than there was previously. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Solaria Energía y Medio Ambiente after today.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Solaria Energía y Medio Ambiente going out to 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. 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.
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