Analysts Just Slashed Their Ceres Power Holdings plc (LON:CWR) EPS Numbers

The latest analyst coverage could presage a bad day for Ceres Power Holdings plc (LON:CWR), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. 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.

Following the downgrade, the current consensus from Ceres Power Holdings' eleven analysts is for revenues of UK£30m in 2022 which - if met - would reflect a huge 26% increase on its sales over the past 12 months. Per-share losses are expected to see a sharp uptick, reaching UK£0.24. Yet prior to the latest estimates, the analysts had been forecasting revenues of UK£36m and losses of UK£0.14 per share in 2022. 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.

See our latest analysis for Ceres Power Holdings

The consensus price target fell 7.5% to UK£11.61, implicitly signalling that lower earnings per share are a leading indicator for Ceres Power Holdings' valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Ceres Power Holdings analyst has a price target of UK£20.00 per share, while the most pessimistic values it at UK£6.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. 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.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's clear from the latest estimates that Ceres Power Holdings' rate of growth is expected to accelerate meaningfully, with the forecast 60% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 35% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 25% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Ceres Power Holdings 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 Ceres Power Holdings.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Ceres Power Holdings analysts - going out to 2024, and you can see them free on our platform here.

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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.