Downgrade: Here's How Analysts See McPhy Energy S.A. (EPA:MCPHY) Performing In The Near Term

The analysts covering McPhy Energy S.A. (EPA:MCPHY) 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.

After the downgrade, the five analysts covering McPhy Energy are now predicting revenues of €18m in 2021. If met, this would reflect a sizeable 29% improvement in sales compared to the last 12 months. Per-share losses are expected to see a sharp uptick, reaching €0.40. However, before this estimates update, the consensus had been expecting revenues of €25m and €0.31 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

View our latest analysis for McPhy Energy

The consensus price target fell 12% to €35.43, implicitly signalling that lower earnings per share are a leading indicator for McPhy Energy's valuation. 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. There are some variant perceptions on McPhy Energy, with the most bullish analyst valuing it at €52.00 and the most bearish at €31.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

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. The analysts are definitely expecting McPhy Energy's growth to accelerate, with the forecast 29% annualised growth to the end of 2021 ranking favourably alongside historical growth of 17% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 15% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that McPhy Energy is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of McPhy Energy.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with McPhy Energy's financials, such as major dilution from new stock issuance in the past year. For more information, you can click here to discover this and the 2 other warning signs we've identified.

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.

If you’re looking to trade McPhy Energy, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.