Analysts Are Betting On Diversified Energy Company PLC (LON:DEC) With A Big Upgrade This Week

Shareholders in Diversified Energy Company PLC (LON:DEC) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects.

Following the upgrade, the latest consensus from Diversified Energy's three analysts is for revenues of US$935m in 2024, which would reflect a meaningful 16% improvement in sales compared to the last 12 months. Statutory earnings per share are anticipated to tumble 92% to US$1.33 in the same period. Prior to this update, the analysts had been forecasting revenues of US$807m and earnings per share (EPS) of US$1.33 in 2024. There's clearly been a surge in bullishness around the company's sales pipeline, even if there's no real change in earnings per share forecasts.

View our latest analysis for Diversified Energy

It may not be a surprise to see that the analysts have reconfirmed their price target of US$29.92, implying that the uplift in sales is not expected to greatly contribute to Diversified Energy's valuation in the near term. 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 Diversified Energy, with the most bullish analyst valuing it at US$45.55 and the most bearish at US$12.72 per share. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. 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.

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. We would highlight that Diversified Energy's revenue growth is expected to slow, with the forecast 16% annualised growth rate until the end of 2024 being well below the historical 31% p.a. growth over the last five years. Compare this with other companies in the same industry, which are forecast to see a revenue decline of 1.4% annually. So it's clear that despite the slowdown in growth, Diversified Energy is still expected to grow meaningfully faster than the wider industry.

The Bottom Line

The most obvious conclusion from this consensus update is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. On the plus side, they also lifted their revenue estimates, and the company is expected to perform better than the wider market. Seeing the dramatic upgrade to this year's forecasts, it might be time to take another look at Diversified Energy.

These earnings upgrades look like a sterling endorsement, but before diving in - you should know that we've spotted 4 potential risks with Diversified Energy, including a weak balance sheet. You can learn more, and discover the 2 other risks we've identified, for free on our platform here.

We also provide an overview of the Diversified Energy Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.

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