Pharos Energy plc (LON:PHAR) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's 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 Pharos Energy's three analysts is for revenues of US$176m in 2021, which would reflect an okay 3.4% improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of US$133m in 2021. It looks like there's been a clear increase in optimism around Pharos Energy, given the great increase in revenue forecasts.
There was no particular change to the consensus price target of US$0.46, with Pharos Energy's latest outlook seemingly not enough to result in a change of valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Pharos Energy analyst has a price target of US$0.50 per share, while the most pessimistic values it at US$0.16. 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.
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. It's pretty clear that there is an expectation that Pharos Energy's revenue growth will slow down substantially, with revenues to the end of 2021 expected to display 3.4% growth on an annualised basis. This is compared to a historical growth rate of 6.2% over the past year. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 10% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Pharos Energy.
The Bottom Line
The most important thing to take away from this upgrade is that analysts lifted their revenue estimates for this year. They're also anticipating slower revenue growth than the wider market. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Pharos Energy.
Want to learn more? We have analyst estimates for Pharos Energy going out to 2025, and you can see them free on our platform here.
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