Things Look Grim For McPhy Energy S.A. (EPA:MCPHY) After Today's Downgrade

Market forces rained on the parade of McPhy Energy S.A. (EPA:MCPHY) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.

After this downgrade, McPhy Energy's seven analysts are now forecasting revenues of €17m in 2022. This would be a major 30% improvement in sales compared to the last 12 months. Losses are expected to be contained, narrowing 14% from last year to €1.07. However, before this estimates update, the consensus had been expecting revenues of €19m and €0.78 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

View our latest analysis for McPhy Energy

The consensus price target fell 6.7% to €21.04, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. 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. The most optimistic McPhy Energy analyst has a price target of €30.00 per share, while the most pessimistic values it at €15.30. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

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 70% annualised growth to the end of 2022 ranking favourably alongside historical growth of 9.7% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 9.7% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect McPhy Energy to grow faster than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at McPhy Energy. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of McPhy Energy.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple McPhy Energy analysts - going out to 2024, 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.

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

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.