News Flash: 8 Analysts Think Capricorn Energy PLC (LON:CNE) Earnings Are Under Threat

Market forces rained on the parade of Capricorn Energy PLC (LON:CNE) shareholders today, when the analysts downgraded their 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.

Following the downgrade, the consensus from eight analysts covering Capricorn Energy is for revenues of US$229m in 2021, implying a disturbing 42% decline in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 54% to US$0.11. Yet before this consensus update, the analysts had been forecasting revenues of US$306m and losses of US$0.069 per share in 2021. 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 Capricorn Energy

The consensus price target was broadly unchanged at US$2.97, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the 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. There are some variant perceptions on Capricorn Energy, with the most bullish analyst valuing it at US$3.00 and the most bearish at US$1.27 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.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 66% by the end of 2021. This indicates a significant reduction from annual growth of 42% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 5.9% annually for the foreseeable future. It's pretty clear that Capricorn Energy's revenues are expected to perform substantially worse 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 Capricorn Energy. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Capricorn Energy's revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Capricorn Energy.

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 Capricorn Energy going out to 2024, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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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.